Microeconomic foundations of the Turkish economy III: firms and entrepreneurs
Increasing growth rates in Turkey’s GDP level have a number of positive implications for the future of the economy. Total output production carried out by both public and private organizations signals a progressive trend in the economic performance overall. However, a well-functioning economy has to have trustworthy and strengthened microeconomic institutions that are shaped by the decisions of firms, consumers and non-governmental organizations This issue Microscope examines the role of firms, consumers and NGOS, beginning with the latter. In this piece, the last part of this series, key statistics relating to the business dynamics of firms and entrepreneurs are analyzed; economic confidence indices, industrial production, trade and services statistics and finally foreign trade figures.
Entrepreneurs and their firms have a pivotal role in the economy in the sense that their economic activities are interwoven with microeconomic players in the market as well as macroeconomic indicators such as unemployment and GDP growth. Therefore, the institutional setting that frames the business arena of the firms becomes very relevant for the economic growth level of countries. The latest announcements from the Turkish Statistics Institute (Turk Stat) on the indices related to firms and entrepreneurs provide a snapshot of some of the economy’s significant actors.
The overall economic confidence index began at 95 in September 2014 and ended at almost 87 in February 2015, with an 8 percent reduction observed during the last six months. Moreover, the index reaches its peak value in October, where a dramatic fall (nearly 10 percent) is recorded in the index. It is appropriate to emphasize the fact that this reduction in the overall economic index, which reflects the average confidence levels of the construction, services and retail trade sectors, signifies a distressing message regarding business trust in the current status of the market. Conclusively, Figure 1 illustrates that whereas the retail trade and real sector in general experienced a downward trend -- in particular during the last two months shown -- the services and construction sectors were on the rise from January to February.
INDUSTRIAL PRODUCTION AND TRADE AND SERVICES
In addition to the economic confidence indices indicated above, this section assesses the monthly industrial production index of 2014 (shown in Figure 2). In this specific analysis, monthly industrial production faced ebbs and flows throughout 2014, when values ranged from 119 to 123. The statistics detailed in the figure refer to the fact that industrial production increased from the beginning of the year to the end, but problem were experiences actualizing steady growth. In addition, the constant increase-decrease cycle implies that Turkey’s
THE OVERALL ECONOMIC CONFIDENCE INDEX BEGAN AT 95 IN SEPTEMBER 2014 AND ENDED AT ALMOST 87 IN FEBRUARY 2015
industry sector may have structural weaknesses that prevent continuous growth within the sector.
The index developed by Turk Stat to evaluate the current status of the trade and service sector is a turnover index that corresponds to the aggregate value of goods and services delivered in the aforementioned sectors. Table 1 reveals the recent statistics in the turnover index covering the four quarters of 2014. The apparent increase in the turnover index from 137 to 172 puts forward a clear statement that the trade and service sectors are performing well in terms of the value of their overall amounts of provision of goods and services, which is line with the first economic confidence index belonging to the services sector in Figure 1. Moreover, a promising increase in the turnover index is spotted in the seasonally and calendar-adjusted index, despite a slight shrinkage in the second quarter. On the other
Export-friendly policies and institutions are indispensible in the reduction of Turkey’s trade deficit.