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    Confessions (1)

    Fatih Özatay, PhD23 November 2013 - Okunma Sayısı: 1111

    It is time for self-criticism. But please hear my version of story first and then decide. To be continued.

    If I were you, I had long ago asked myself if it a waste of time reading this column. True, it takes about five minutes to read it, but it’s not just reading. I am sure some of you, particularly after pieces that I talk big about economic prospects, spend some more time thinking on my claims and theories. The year is about to end and I feel the urge to talk about the prospects for 2014. But first I have to give an account of my claims for 2013; without doing that, I think there is no point in talking about 2014.

    On 20 December 2012, I presented a baseline scenario for 2013, which mainly relied on external conditions. Following that I wrote a couple of pieces aimed at answering how the Turkish economy would perform under the baseline scenario. Now it is time to ask to what extent that scenario was realized. Below is a summary of the key assumptions of my baseline scenario for 2013:

    “1) The Democratic and Republican parties concert, preventing a fiscal cliff and the risk of implementing wrong policies at a wrong time. On the other hand, let me remind that the US does not have much time for reaching a consensus. 2) The current conditions in Europe remain intact. In other words, Europe continues slithering. New risks unveil. 3) Growth performance of Turkey’s export markets are in line with the IMF’s latest estimates: European Union grows at a rate slightly above that in 2012 while growth in Middle East and North Africa, the second largest export partner of Turkey, diminishes year-on-year. In cumulative, Turkey’s export partners grow only slightly. 4) The influence of the political tensions across Turkey’s region remains unchanged. 5) The price of crude oil does not change, either. 6) Despite an upwards trends in credit demand, domestic credit growth rate does not change considerably, in harmony with the recent statements by the economy management.”

    How about realizations?

    1.) The Democratic and the Republican parties reached a deal early this year but then lost it again. The US Congress was shut down for a while as a result. But the false fiscal policy was maintained only for a short while. 2.) The economic performance of Europe remained slippery. 3.) The IMF revised its estimations downwards. Europe is expected to grow at a higher rate compared to 2012 but growth is expected to be slower than anticipated both in Europe and the Middle East and North Africa. Yet, there is no significant difference between the initial estimations and revised ones for both of the regions. 4.) Turkey has felt regional tensions more severely, particularly concerning Syria. 5.) The average price of crude oil was $111.6 in 2012. The 2013 average until the previous day is $108.3. 6.) Credit growth rate was around 16 percent as of the second half of 2012 (by the method the Central Bank uses); whereas it was 27 percent in 2013 as of the end of October.

    Not bad, the credit growth rate excluded. And note that I said the rate will not change significantly “in harmony with the recent statements by the economy management.” I can easily argue my way out saying the economy management did not act in line with their statements. Should I feel proud, then? Far from it! I am sure you have noticed that my baseline scenario did not even mention the Federal Reserve’s (FED) policy agenda which has been absorbing financial markets since May. The headline of the year was indeed FED’s statements.

    It is time for self-criticism. But please hear my version of story first and then decide. To be continued.

    This commentary was published in Radikal daily on 23.11.2013