‘ Tight’ and ‘tense’ agenda for the G20
In 2015, when Turkey was the term president of the G20 Summit and President Recep Tayyip Erdoğan welcomed the world’s prominent leaders in Antalya, the agenda of the G20 Summit and the issues discussed in international media received a lot of attention with Turkey’s diplomatic success. Turkey succeeded to include issues of critical importance such as worker-employer relations, small and medium-sized enterprises (SMEs) and women’s position and influence in the world economy in the G20 agenda and important meetings were held on these issues. During the Chinese term presidency, immediately after Turkey’s, the international media partly covered the G20, however the year of Germany’s chairmanship was dull and the G20 was hardly covered by international media.
Argentina, 2018’s term president, is also experiencing a similar problem. As part of their agenda, Argentina is putting forward: the increasing effects of digitization and technological advances in the global economic system on occupations, working conditions and employment; the private sector taking on more responsibilities in the development of countries and infrastructure investments; and creating a sustainable future for food.
The first international summit that the Treasury and Finance Minister Albayrak will be attending in Buenos Aires, the meeting of the G20 finance ministers and central bank presidents, will take on many issues such as: a strong, sustainable and balanced growth framework under the shadow of the U.S.-triggered global trade and currency wars, international financial architecture, financial arrangements, taxes, inequality and employment.
At the previous ministerial meeting, cryptocurrencies and Bitcoin were discussed. The primary agenda at the ministerial meeting is going to be the damage caused by the U.S.-triggered trade war on global growth and trade and its potential igniting effect on global inflation. In the last issue of the U.S. Federal Reserve’s (Fed) “Beige Book,” the concern of U.S. producers over Trump’s additional import taxes was emphasized. International institutions, especially the IMF, are worried that the trade battles may have negative growth effects on 0.3-0.8 points of the world economy.
It is critical that the G20 member countries adopt policies to renew their commitment to international cooperation and to adopt policies towards higher and more inclusive growth against rising risks in the global economy. Therefore, Minister Albayrak will have important findings in terms of Turkey - no doubt - being the country that puts out the most in terms of determinism towards international cooperation. It should also be noted how critical the preferences of the leading central banks for monetary policy, especially that of the Fed, are in terms of a sustainable world economy.
THE DILEMMA OF REFORM AND MACRO PRE CAUTIONARY MEASURES
In the last two years, we are going through a “polarization” towards the Turkish economy’s local and global perception. While certain economists and market professionals define the Turkish economy’s macroeconomic problems as an area gradually moving towards a more dangerous direction, even “being driven away” as they say, another group of economists and market professionals including myself state that these problems can be managed. Of course there are international economic actors who agree with the first group’s approach that “the Turkish economy is being dispersed somewhere.” To change the perception of this “pessimistic” group of domestic and foreign origin, the previous economic management emphasized that in the last one and a half years it would continue with the “reforms.” My worry is that the aforementioned “reform” statement has turned into a discourse that ignores the many important reforms realized over the last 16 years and almost overshadows the positive effects of the reforms that were carried out.
In the last 20 years, the concept of economic reform can be summarized in the extent of emerging economies, the important regulations that allow a transition from a more public-weighted economic structure to a marketweighted structure. We can list effective regulations in the banking and finance system, auditing, legal regulations that will enable a healthy market economy, the public’s transition to the medium-term program model in terms of a three-year strategic plan, central government budget and fiscal discipline rules and regulations that improve the investment ecosystem, and the central bank’s vehicle independence as examples of reforms. However, the banking sector limiting loans to the real sector, regulations to limit exports in order to decrease the current account deficit, reducing public expenditures, raising taxes, limiting real wages, or raising interest rates of the monetary policy are not reforms, they are “macro precautionary measures.”
The “orthodox” macro precautionary measures effect on the real sector, employment and growth is heavy; the countries that have paid the price have passed to “heterodox” measures. Turkey will continue with reforms towards more active entrepreneurial and science-technology-innovation ecosystems, to render Turkey more attractive in direct investment when compared to our global competition, and that will make Istanbul a regional financial center. I see great benefit in mixing up these reforms now with precautionary measures that will alleviate Turkey’s macroeconomic problems and to not go down the “Turkey should carry out reforms” statement by some economists.