The natural gas reserve found in the Black Sea region was named the Sakarya Gas Field after the northwestern province that has been home to many historical turning points. The discovered pocket also harbingers the possibility that there may be larger reserves in lower tiers.
This great reserve opportunity and the positive economic results of possible new discoveries can be summed up in five headlines: Capability of energy self-sufficiency, hydrocarbon export revenues, competitive energy prices for exporters of goods and services, price stability in energy and a Turkey with a current account surplus.
Last weekend, Turkish news channel A Haber and economy channel A Para's Chinese correspondent Sadi Kaymaz shared an interesting energy story about China and the Soviet Union. According to the report, during a time of immense Soviet pressure, China witnessed a turning point in its independence after the 1950s discovery of oil reserves in Heilongjiang province, in a city that would be later called Daqing (Great Celebration). Thanks to the find, China was able to be self-sufficient in energy until the early 2000s.
On that day, Soviet technicians withdrew from the efforts following Moscow’s order. Earlier this week, we learned with great joy that two European Union citizens that were similarly urged to “withdraw” continue to participate in Turkey's drilling, demanding to be citizens of the republic.
No matter how much a few unidentified people rent their souls, hearts and brains to global power centers' struggle to negatively influence this news from 10,000 kilometers away, the fact remains that a 320 billion cubic meter (bcm) discovery of natural gas is a development that will extraordinarily strengthen Turkey's ability to be self-sufficient in energy, drafting a new plot for sustainable development.
For a country that is working to become among the world's most ambitious in terms of renewable energy facilities and technology, this 320 bcm discovery and the strong possibility of more means billions of dollars in hydrocarbon export revenue.
The fact that Turkey will be able to effectively manage energy prices for the agriculture, manufacturing and services sectors through local facilities and capabilities will mean the nation has a critically important cost management opportunity versus its global competitors.
At the same time, due to the fact that Turkey will be able to manage and sustain its own energy costs, it will gain significant maneuverability in terms of stability for producer price index and consumer price index.
Finally, it will mean getting rid of energy import bills of $10 billion (TL 73 billion) or more per year, and with doubling exports, switching to a sustainable current surplus from 2023 onward.
Therefore, with a determination to suppress the noise of some, let’s focus on the multiplying positive effect of the 320 bcm discovery and future explorations.
Strong signals for 3rd quarter
As you know, last week, I shared my growth forecast for the second quarter at minus 8.6% in an optimistic scenario and minus 17.46% in a pessimistic scenario. The midpoint of these two ratios is a 13% contraction, but let's write down my own minus 13.67% estimate here. If we say a 8.6% contraction at 70% probability and a 13.67% contraction at 30% probability, the average of the estimates is a contraction of 10.1%. A significant proportion of economists, however, are expecting a contraction of between 13% and 14%.
Data for the third quarter, on the other hand, continues to indicate strong signs of a V-shaped recovery. Fortunately, the real sector confidence index, which was 106.9 in February when the global pandemic was just getting started, jumped 5.5 points compared to July, and reached 106.2 points again in August.
The real sector confidence index, which last saw 109.9 points in May 2018 before the currency attack that August, would only exceed 106 points again in February 2020. Although it declined with the virus outbreak, the fact that it surpassed 106 points again indicates that the manufacturing industry has made a strong recovery.
Above all, it is important that the appetite for fixed capital investment, which fell to 69.9 points after collapsing by 30 points during the worst period of the pandemic last April, returned to its March level with 92.7 points in August.
The kick-off in investment expenditures undoubtedly demonstrates that the recovery in private sector investments will also have a positive effect on the third quarter gross domestic product (GDP) growth.
At this point, for both in July and August, the fact expected export orders over the next three months are consecutively above 120 points is promising both in terms of the contribution to economic growth and in terms of the recovery in export volume.
Another reassuring detail is the employment trend for the next three months. The estimation, which dropped down to 86.5 points in April and recovered to 101.8 points in June, hit 107.3 points in August despite the pessimistic claims of some economists who worry that subsidies such as short work allowances have completed their rounds. The desire and tendency to protect the workforce in the manufacturing industry, however, is quite strong.
An environment where the order of goods collapsed to 44.6 points, down by 78 points, where the performance of the order of goods for the last three months recovered from 49.9 points to 113.5 points and where the production volume expectation for the next three months has recovered above 130 points over the last two months indicates that predicted growth data for the third and fourth quarters is quite strong.
It seems that Turkey will once again surprise the leading actors of the world economy with its second-half growth rates in a setting where the capacity utilization in the manufacturing industry has recovered to 73%, the rapid rehabilitation in the manufacturing and services sector continues and retail trade maintains its positive picture.