Turkey, with regards to a principle shaped at the G20 summits, was the first country to act on sharing its three-year strategic plans in the macroeconomic area with the public and on establishing the Financial Stability Committee. Consequently, we published 13 medium term programs (MTPs), the first of which was in 2005. Having said that, the last three MTPs began to show inconsistencies for macroeconomic growth targets in terms of uniformity, growth, employment, the current account deficit, inflation and budget. Therefore, it is very important that the name of the three-year macro strategic plan was renewed as the "New Economic Program" (NEP), its content was strengthened, consistency was shown for the macroeconomic targets from 2019 to 2021, and that a grounded and realistic program was designed.
The 3.8 percent growth forecast for the whole of 2018 – considering that Turkey grew over 6 percent in the first half of the year – shows that the 1.2 to 1.4 percent average growth is predicted for the 6 months and that even though the third quarter growth is positive, the possibility of negative growth in the fourth quarter is also taken into account by economic management.
At this point, a 2.3 percent to 3.5 percent GDP growth rate target for the 2019-21 period – that will enable price stability (the fight against inflation) and financial stability (the fight against account deficit), will increase the savings of households, the private sector and public savings in the economy, and will enable to sustain public fiscal discipline – is extremely realistic. It was also possible to design a program with very heavy conditions by reducing the growth over these two years to around 1 percent, by highly limiting the rise in employment, and defining the non-interest surplus at a higher level to strengthen fiscal discipline in the public sector.
However, against the negative waves coming from the global economic system where it is expected that the conditions will deteriorate even more following the second half of 2020, a program that will leave the Turkish economy fully breathless and weak by the poverty and unemployment it would cause and due to global waves, it would have made 2021 and post-2021 unmanageable. Therefore, considering the minimum "oxygen" conditions the Turkish economy would need, a steady, not "wild," program was designed.
The only shortcoming, additional detail demanded from the NEP is the restructuring of the credits between the real sector and the banking sector, and the fact that the steps to ensure the normalization of the financing channel are not yet clear. Almost all economists believe that the success of this program – with realistic, consistent objectives – during the "balancing-discipline" period, the establishment of new institutions such as the Financial Stability and Development Committee, the Office for Change and Transformation of Public Finance will open up a magnificent area for the "transformation" toward production and exports focused on higher value-creation.
U.S. can trigger 'global stagflation'
Under President Donald Trump's administration, the economic policies in today's U.S. government that it follows at the international and domestic level worry many respectable names from 76-year-old financier Jim Rogers, who made important statements in the last few days, to Nouriel Roubini, who is applauded for having foreseen the last financial crisis. Rogers, who has worked in local and global financial markets for over 50 years, shared his concerns that he believes we are being dragged into a global "bear market" – the worst he has seen over his business life – where stocks and bonds will be faced with a heavy sales wave.
On the other hand, according to Roubini, there is a bubble in the U.S. and global stock markets. In the United States, the price/earnings ratio of stocks is over 50 percent of the historical averages, and U.S. Treasury bonds are overly expensive. Turkey took important measures for its forex (foreign exchange) market and had warded off the risk. In contrast, Roubini points out that the leverage rates used in some emerging and developed markets are extremely high and warns that when the "global storm clouds" start to approach, country's stock markets, commodities and fixed-income assets will continue to improve in the developing countries. This is why investors that price the future will wait for the growth to slow down in 2020 and markets will re-price risky assets in 2019.
All reputable names point out to the fact that U.S.-led trade and exchange rate war will increase global inflation, thus the central banks of leading developed and developing economies will raise interest rates, and thereby to the fact that global liquidity, i.e., the amount of money in world trade and finance, will decrease. The worry has escalated that this "negative" situation, as if the increase in the inflation is not enough, will negatively affect the global production, growth and trade, will significantly increase unemployment; thus pushing the world economy to "global stagflation" conditions. It is emphasized that Trump's unnecessary and unwarranted "consolidation" policies are dragging the United States toward a heavy economic depression during the 2020-22 period with a more severe budget deficit and the current account deficit.
Considering the rapidly approaching "winter" conditions in the global economic system, Turkey has to carry out measures and reforms to quickly improve the inflation, the current account deficit and the banking-corporate sector relations with an effective "balancing-discipline" period and follow a process that will eliminate the economic war with the U.S. and the operation against Turkey. The success of the New Economic Program will ensure this.