Political calibration with 'moderate' growth

Published 13.07.2018 23:00
Updated 14.07.2018 01:54

The first Cabinet of the presidential governance system and its new economic management awaits a very important "calibration" process in the monetary, fiscal and direct-control policies. The additional tariffs imposed by the U.S., predominantly on China, as well as the European Union, U.K., Canada, Mexico and Turkey, will lead to new inflationary pressure in the global economy.

Concurrently, the U.S. Federal Reserve seems to be determined to maintaining its monetary policy. The global trauma caused by the U.S. administration and the Fed increases the risk of capital outflow from emerging economies. These critical issues that have grasped the world economy make a "moderate" growth at the 3-4 percent band, a reasonable tightening of monetary and fiscal policies, the development of policies supporting exports, and policy sets to differentiate essential and non-essential imports necessary for the Turkish economy.

A very difficult two-year period - regarding the uncertainty and confusion caused by the trade war - awaits leading developing economies such as Turkey, where they would have to finance their growth and development with their own resources.

This is why all leading developing countries will follow an effective "local and foreign cash management model" regarding the lessons they gathered since the 1960s during the contractions they encountered in the "periodic" fluctuations. Public expenditures will be evaluated according to their priorities, and "calibration" studies will be accelerated to increase the quality and efficiency of both public income and public expenditures.

We will see together that these steps will be taken for China, India, Brazil, Mexico, Turkey, Russia, South Africa, and all of the Eastern European countries. All of the countries that are leading the world economy, especially China's "moderate growth" preferences, will cause commodity prices to partially fall and will balance the "global inflation" risk, which was caused by the U.S.-triggered trade wars.

During this period, the eurozone will try to respond to the global trade war of the U.S. by allowing the British, Canadian and Chinese currencies to depreciate against the dollar, thus adding the "currency war" to the game.

This is why it is important to manage the value of the Turkish lira against the dollar and the euro such that we are minimally affected by the trade wars.

Famous investor Mark Mobius has said that Turkey's exposure to the trade war will remain low. In the meantime, such as in the case of Iran who has decided to not to trade in U.S. dollars from now on with the countries who are loyal to the nuclear deal, China can also respond to the U.S.' new "$200 billion" additional customs tax by moving away from the U.S. dollar. Taking into account the global situation, it might be wise for Turkey to pass to a "moderate growth" band for the next year and a half.

Model for dynamic communication with the market

For the last couple of years, despite the institutionalized success and Turkish economy's deep and settled macro balances, because of the occasional accidents observed in the "communication strategies" and even the "miscommunication" crises observed at the most necessary moments, we have experienced fractures in the Turkish economy.

Today, we are going into a new era where we will efficiently use the advantages of the new proactive structure and rapid decision-making process provided by the presidential governance system. Hence, we will witness that - based on the fact that 50 percent of the economy is the psychological perception of the market - a new "communication strategy" will be established that will communicate the reasoning behind the sets of policy and their implementation processes as much as the basic issues such as price stability and financial stability, thus the success in realizing effective road maps for the fight against inflation and current account deficit.

This process will be more than a "communication strategy" on what the markets want to hear but rather a period where a transparent communication approach, on Turkish economy's economic policies and on the fact that the solutions to fundamental macro balances are shaped and will be shaped according to the realities of the global economy, will be sustained.

In the previous period even though headlines such as vehicle independence of the central bank and fiscal discipline are principles that are settled in terms of economic management, now we are entering a new era where the communication on the "uncompromising" stance regarding these principles will be carried out much stronger.

Common language, common "self-confident stance," moderate and effective communication, and "dynamic communication" constitute the trivet in economic management. Thus, giving importance and planning the "dynamic communications" strategy of this new era and creating a new communication context according to the dynamics of the Turkish economy is as important as quickly creating a set of policies for priority issues of the Turkish economy, rapidly implementing policies.

It would be more fitting for both the financial sector and the real sector to have patience and wait for the new "communication strategy" to be shaped rather than expecting hasty, "save-the-day" statements from the new economic management team or an attitude of "disorganized" statements toward the "perception operations" that are incompatible with the corporate governance structure of the economy.

With significant experience in the public and private sector and with their accumulated and successful performances in communication strategies - the importance of which has risen greatly over the last five years - we will quickly observe the new Cabinet's abilities.

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