Currently, the global economic-political system is embroiled in a tedious, tense and tiring transformation, shifting toward a new world order. Global trade wars, regional conflicts and tension, global poverty and hunger, global climate change or, in short, the status of global conditions require that people act in greater solidarity and empathize with each other to steer decision-makers away from simply following their own self-serving agendas. In the light of this reality, the 10th Bosphorus Summit brought together hundreds of global and regional opinion leaders from more than 90 countries under the theme "Toward the New World Order," with keynote speakers and panels featuring 3,000 distinguished participants. At the summit, which has been held under the auspices of the presidency since its first year, President Recep Tayyip Erdogan's famous statement at the United Nations, "The world is greater than five," continues to occupy the global agenda. This trend is directly related to the fundamental global problems mentioned above and emphasizes the creation of an agenda that concerns humanity as a whole. A prominent group of participants, including senior politicians, ministers, bureaucrats and representatives of the business community such as Turkish Republic of Northern Cyprus (TRNC) Prime Minister Ersin Tatar, former German President Christian Wullf, former Colombian President Andres Pastrana and former Spanish Prime Minister Jose Zapatero, have gathered at numerous roundtables and panel discussions on many topics. With headlines focusing on economics, science, defense and education, there were many crucial issues to discuss. The future of globalization, the migration and refugee problem, energy supply security, digital transformation and developments that challenge global trade were also hashed over in detail.
For instance, Zapatero’s statements during his speech had a tremendous impact: "Turkey is a very important power. Its capacity to bring East and West together is great. Turkey should be in the European Union. I have always defended this. It would have been great for a better Europe.” Germany's Wulff, on the other hand, pointed out the weight of the world's gross domestic product (GDP) is shifting toward Turkey, the Arab world and China, and that Asia’s rise with China's Belt and Road Initiative should be taken seriously. Wulff underlined that, at this stage, Turkey could be a bridge between Europe, Asia and Africa and that it would be the smartest way to go. The world's respected names often referred to Turkey's importance, inclusiveness and its role as a "playmaker" to strengthen the ties between the Atlantic and Asia-Pacific during the 10th Bosphorus Summit. Turkey’s ability to bring together leaders of the global system under the hospice of the presidency under the aegis of an international organization such as the Bosphorus Summit reinforces its emerging role in the global system. Let's take a moment to reflect on the results seen from such meetings.
Signals of growth Expectations that the Turkish economy will end 2019 with positive growth of between 0.3% and 0.8% are getting stronger. Without exception, from the International Monetary Fund (IMF) to the Organization for Economic Co-operation and Development (OECD), from international financial institutions to international rating institutions, all institutions have revised their expectations to say Turkey will end 2019 with positive growth. The manufacturing industry capacity utilization rate, real sector confidence index and consumer confidence index data, which we have been monitoring since September, all point to strong signals for positive growth. While we have seen positive increases in confidence index data that reflects the pulse of the Turkish economy, it is important that the favorable opinion of companies, especially those in the manufacturing industry, carried the index from 95.9 points in October to 102.1 points later in the same month. As the rebound in the order volume in the manufacturing industry continued in October and November, compared to September, with the content in the improvement of the orders, especially in the last three months, the fact that the total order index increased from 90.8 points in September to 103.3 in October and even higher to 108.2 points in November bolsters the positive signals in production, economic recovery and growth. Since September, this situation, by keeping the production volume expectation for the next three months at the 108-109 point level, has been improving not only the expectation for the production and growth performance for the third quarter of 2019 but also for the fourth quarter. In fact, capacity utilization rate data for November has already confirmed this picture. The manufacturing industry has displayed a positive stance in the last three months to maintain its employment for the next three months; therefore, due to the recovery in domestic demand in the economy, a move to reduce unemployment will be observed around mid-spring of 2020.
If growth is in question, the contribution of domestic and foreign demand to growth is important. For the contribution of domestic demand to growth, besides household consumption expenditures and public expenditures, private sector investment expenditures, new machinery and new facility expenditures are very important for healthy growth. At this point, as of September, fixed capital investment expenditures, that is new machinery and new plant investment trends, which were at 100.6 points have increased to 106.3 points as of November. This increase is also important in terms of the contribution of the investment expenditures to growth. In terms of foreign demand, with regard to the contribution of net exports in growth, the manufacturing industry continues to be determined. According to this, despite the uncertainty caused by the trade wars, the export order expectation for the next three months in November remains positive at 108.9 points. This, in addition to closing 2019 with positive growth, indicates that we will enter 2020 in a market environment that has increased its dynamism and that the 2020 growth will be 3.5% and above.
About the author
Kerem Alkin is an economist, professor at Istanbul Medipol University. He currently serves as the Turkish Permanent Representative to the Organisation for Economic Co-operation and Development (OECD).