Has the recovery begun?
OUR ECONOMY contracted sharply in April and May. So, has the recovery in our economy begun? After so much shrinking, this is the right question for three reasons: First, some of the businesses that were closed due to the coronavirus outbreak based on an executive order re-opened as of the last week of May, while the rest followed suit in June. Second, there’s an apparent increase in public expenditures.
Third, nearly through the entire pandemic, the government announced measure after measure to increase the banking sectors’ loans. The Central Bank announced the last loan incentive last week. With the announcement, a striking increase in loans by the public banks began, and private banks followed shortly after. According to data for the week ending June 12, public banks and private banks increased their loan supply by 123 percent and 35 percent, respectively, compared to the previous year. When the 11 percent inflation during the same period is taken into consideration, it’s clear that real credits have increased significantly.
To answer the question that I asked off the top: we need to check the data. The first is electricity consumption. During the April-May period, electricity consumption decreased by 16.1 percent compared to the same month of the previous year. This sharp decrease came to an end in the first 21 days of June, as electricity consumption only fell by 0.1 percent. However, there was a long Ramadan holiday between June 1-9 in 2019. Let’s focus on June 8-21 to provide a fairer comparison. Compared to June 2018, electricity consumption decreased by 4.5 percent in 2019. To provide insight, let me remind you that electricity consumption fell by 6.3 percent in the first quarter of 2009, when our economy contracted by 14.4 percent. However, between April 1 and June 21, 2020, electricity consumption fell by 12.1 percent, nearly double the drop of 2009.
Electricity consumption is not enough to pass judgment. The services sector experienced losses due to the outbreak. In my previous report that I co-wrote with Guven Sak, published on Daily Dunya, I said, “the return of the consumer to pre-pandemic consumption levels” will determine the success of normalization, not administrative decisions.
Weekly credit card expenditure data may provide insight into the services sectors. However, there were sharp decreases in the data even in the pre-pandemic period. For example, expenditures recorded a strong decrease on •ctober 16, 2019, and a very sharp increase the next week. This data can become an important information source for the sectoral distribution of consumption if it’s thoroughly evaluated. •n the other hand, the June consumption expenditures data signal a recovery. According to three-week averages, the annual decrease of credit card expenditures fell to 19 percent on June 12, compared to the same period of the previous year.
Considering the abrupt loan increase, June’s performance will be better compared to May and April. However, let’s not forget that we’re still in the contraction zone.
“The return of the consumer to pre-pandemic consumption levels” will determine the success of normalization, not administrative decisions.