Since the 2008 financial crisis, due to either blindness stemming from guilt or a weakening of their professional skills, a series of failures have occurred in the forecasts of economists of international economic institutions and global financial institutions. While pessimism weighs heavily in expectations, we see that the macroeconomic data of the global economy and of leading economies point to some far better statements. I am trying to understand the psychological state of these economists. Is the negligence and prejudice in their forecasting methods a part of the failure of their estimates? The latest example of this psychological atmosphere is related to Turkey's growth numbers. Since the end of 2016 until almost the beginning of the spring of 2017, reports from most international institutions could not accept that the Turkish economy could grow 5 percent or more in 2017.
However, data on Turkey's production, manufacturing capacity, double-digit increases in export volume and substantial recovery in tourism, combined with the megaproject investments that Turkey continued at full speed, all point to the fact that growth numbers will be high. In early November, following the announcement of September's production data when I shared my forecast of 10.2 percent to 10.4 percent growth for the third quarter of the year with economic circles and my readers when these economists' estimates ranged from 7.9 percent to 8.5 percent. Last Monday morning, in my article published before the announcement of the third quarter growth rates, I revised my estimate to between 11.5 percent and 12.2 percent. Economists' expectations were around 10 percent. Turkey's growth was disclosed to be 11.1 percent, making Turkey the G20 country with the highest growth rate.
Now, with the same bizarre psychology, economists, rather than trying to understand the dynamics of the Turkish economy's growth, are trying to find flaws in this record 11.1 percent. We can summarize the points they should actually focus on. The Turkish business world is not like that in any other country. In many of the world's leading economies, when economic and political uncertainties arise, the business world says wait and see. The Turkish business world says work and see. In other words, Turkey overcomes economic and political uncertainties by producing. Thus, the revenues and employment of companies are protected, and market dynamics are sustained. Second, Turkey is the leader of Eurasia with an industrial production of $190 billion. In a country where manufacturing is so important, the wheels of production are also strong. Third, the economic administration in Turkey got valuable lessons from the 1994 and 2001 local crises, and whenever it is observed that risks are rising in the Turkish economy, macro-prudential precautions immediately come into play. The successful measure of 2017 was the Credit Guarantee Fund (CGF).
The positive effect of reforms
Another important point regarding the dynamics of the Turkish economy is the important regulations of the past. Following the 2008 global financial crisis, borrowing in foreign currency was banned for households with a regulation. Thus, currency fluctuation does not create household crises. There are conditions of 25 percent to 50 percent personal saving for mortgages and 30 percent to 50 percent for automobile loans. Banks do not have short positions in terms of currency. Therefore, market fluctuations do not cause shock waves in the economy. The work is not done by putting Turkey on the Fragile 5 list without wholly analyzing the dynamics of the Turkish economy.
As a matter of fact, the international credit rating agency Moody's, in the report it published on Dec. 13, said that the outlook for South African and Turkish companies is negative and that a lot of Turkish companies have leadership positions in the market and strong liquidity in their industries despite challenging environmental conditions. It pointed to the growth opportunities for Turkish export companies. Insistently placing the Turkish economy, which sustains its strong-minded position regarding fiscal discipline and has very strong banking ratios, in the Fragile 5, even though there are counties with far heavier debt burdens, gives the impression that foreign economists are succumbing to political influence more than conducting economic analysis.
Foreign economists should carefully read the Turkish economy, with its young population and 2 percent growth despite carrying the burden of the daily expenses of dynamic households. In total, 7.01 points of the record-breaking 11.1 percent growth stem from household consumption, 0.35 points from the final consumption expenditure of the government, 3.57 points from investment spending and 0.34 points from the net export of goods and services. It is the right time for economists to step out of their current frames of mind to more effectively analyze economies like Turkey's.
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