2017-2018 expectations for Turkish economy

Published 04.08.2017 01:07

After overcoming the July 15 coup attempt, the Turkish economy is again approaching its pre-Gezi Park pace. The figures we have obtained point to the growth achieved in 2011. The important thing here is to quickly remove the shortcomings and transform it into a continuous and inclusive growth pace.

The qualification and sustainability of the growth is of vital importance. Otherwise, unequal, artificial and unsustainable growth can pave the way for many diseases in the economy, just like the unhealthy weight of an obese individual. However, leading indicators now show us that, just as in 2011, we are on the verge of a growth tempo that supports the middle class, creates employment and thus relatively improves income distribution. The recent inflation data for July 2017 indicates that consumer inflation has fallen to single-digit figures - which is mainly because of the impact of the Central Bank of the Republic of Turkey's (CRBT) tight monetary policy. The CBRT has already reiterated in the latest inflation report that it will maintain its tight monetary policy stance. We will see single-digit inflation figures and a gradual downward-trend inflation at the end of the year. So, there is no problem here. The important thing here is growth and unemployment where there are positive developments and a promising trend.

The leading data for the second and third quarter of 2017 indicates that the 5 percent growth rate achieved in the first quarter will continue to rise. The Purchasing Managers Index (PUMAX), which the Independent Industrialists' and Businessmen's Association (MÜSİAD) has been successfully releasing since early 2014, reached 59.2 in July - which is a historical peak. The industrial index of 6.3 percent had influence on this high rate of the index.

Even though the inventory renewal depending on exchange rate advantage has an effect on this rapid rise, exports in July reached the record rise achieved in 2011. Turkey's exports in July reached $11.474 billion, marking a year-on-year increase of 31.2 percent. This is the highest rate after the 31.9 percent rise we attained in August 2011.

This data shows that the Turkish economy is about to re-achieve its 2011 performance. Now, let us look at what the growth in 2011 was and what happened in 2012 and 2013 after this growth.

After Turkey shrank in 2009, its story in 2010 and 2011, the first years of the Turkish economy without the International Monetary Fund (IMF), is interesting.

Turkey's growth in 2010 and 2011 approached 9 percent in both years, but these two years not only experienced a quantitative leap, but a new middle class and a new class of capital apart from the traditional capital emerged. Anatolia was almost reborn; investments in health, education and transport reinforced the new middle class and raised its material and cultural demands. The inclusive growth is a very important concept that tells whether the growth is balanced among different segments of society and especially whether it takes place in favor of the poor segments and regions.

Turkey achieved inclusive growth from 2002 to 2011 when growth especially in developed countries in the world fell and inclusiveness declined. In other words, income distribution improved in favor of the poor and middle classes and the interregional income gap narrowed. The study by Temel Taşkın from the CRBT on this issue reveals that inclusive growth took place in Turkey from 2002 to 2011. The variable named the inclusiveness measure is the result of income and regional income distribution analysis depending on per capita national income and regional income distribution data.

In this period, the total measure of inclusiveness in Turkey marked an increase of 5.8 percent on average annually. Two-thirds of this came from the national per capita and one-third from the distribution. This is a very important ra

te in terms of inclusiveness.

In our view, the peak of this inclusive growth was seen in 2010 and 2011.

Just like in 2011, Turkey took a growth opportunity that improves inclusiveness and income distribution now.

So, what about the position of our institutions such as the Credit Guarantee Fund (CGF)? First, let me say that the CGF will go on. However, credits approved by the CGF will be given to leading sectors, namely sectors with high added value, competitive areas and industry and export-oriented areas. In other words, we will see a more selective loan practice. The CBRT will maintain its tight stance and inflation target and the CGF's supportive position for the industry and exports will also help the CBRT's key objectives. In this framework, we expect growth of nearly 6 percent in the second quarter and 7 percent growth in the third quarter. The growth in 2017 will be close to 6 percent in general and will be record growth in recent years for the Turkish economy. We believe that the same performance will continue in the year 2018 and that this should be included in the Medium-Term Program (MTP).

We also anticipate that Turkey's exports to Europe will continue to increase in the upcoming period. We predict that the tension with Germany will be removed in a short time as required by mutual interests or this tension will be limited only on the political level and not have much reflection on the economy.

As a matter of fact, four out of eight companies that participated in wind energy tenders last week are German companies. So, while some have a storm in a teacup, German companies and the Turkish economy do not swim in this shallow water. It should be like that anyway. This is because Turkey is the only remedy for the European economic crisis today. Without Turkey, Europe cannot recover.

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