Transition to production-based growth required
Turkey grew by 5% in the first three months of the year. Let’s be happy with that. But the public should also recognize the source of this growth. The government took a large number of measures to revive the stagnating and slowing economy and it blew money to markets through credits. Consequently, it pursued practices that would increase consumption expenditure. As a result of these measures household consumption increased by 5.1% and state expenditure rose by 9.4%.
Some 3.1% of the growth came from household consumption and 1.3% came from increases to state expenditure. In brief, 4.4% of the 5% growth was generated through consumption increases. The share of investment is 0.6%. Attention please: we spent on consumption, not investment.
The manufacturing industry is the main dynamic powering this growth. TurkStat released the figure for industrial production increases (based on manufacturing quantity-volume) as 1.4% for the first three months. But industry’s share (as added value) of the GDP is 5.3%. The manufacturing industry’s added value increased by 1.5%. That indicates a significant structural change within the sector for the first quarter of 2017. It indicates that the added value increase surpassed the manufacturing increase. It’s an important indicator regarding change that we should emphasize.
The government won’t have the ability to blow money to the markets all the time to increase demand. The traditional source of consumption-based growth is in- come. Unless household and state income increase continuously, consumption won’t increase either. Production is the source of income in an economy. Production creates income and employment. Therefore, the public should know how the Turkish economy grew by 5% in the first three months of the year. Don’t forget that consumption-based growth without production is not sustainable.
People are at the core of any economy. Whether managing or managed, employer or employee, the morale of the people determines the direction of the economy. Morale means feeling good today and having confidence in the future. We were depressed for a long time for different reasons, so 5% growth is like receiving money from our own homes. Investors and industry will observe that business is growing and increase their investment and production accordingly.
Wholesalers and retailing Anatolian tradesmen will assume business is growing and renew their stocks. The ones with money or the opportunity to borrow will think “tomorrow will be better than today” and increase their expenditures. Interest rates won’t become cheaper unless inflation falls. But a “things are going well and will go well” attitude will encourage the debtors and the ones who want to become indebted. They will start not to worry about interest rates. Growth figures were released just at a time when the market and the people needed a boost in morale. The growth rate figures for the first quarter will promote buoyancy for a while. If this boom turns into a production increase, then we may yet enter a real growth period.