The Turk­ish econ­omy in sum­mer 2015: catch­ing a cold when it’s warm?

Turkish Review - - MICROSCOPE - TAPTUK EMRE ERKOÇ

In sum­mer 2015, the Turk­ish econ­omy failed to send op­ti­mistic sig­nals to in­vestors, with its mi­croe­co­nomic in­sti­tu­tions in par­tic­u­lar go­ing through an un­pleas­ant pe­riod, which at times al­most re­sem­bled eco­nomic cri­sis. It ap­pears po­lit­i­cal risks emerg­ing as a re­sult of the June 7 gen­eral elec­tion had a neg­a­tive im­pact on al­ready wors­en­ing trends in mi­croe­co­nomic in­di­ca­tors such as eco­nomic con­fi­dence and in­dus­trial pro­duc­tion in­dices This piece aims to shed light on the cur­rent out­look of Turkey’s real sec­tor dy­nam­ics by look­ing at the eco­nomic con­fi­dence in­dex, in­clud­ing sub-in­dices and in­dus­trial pro­duc­tion and tourism fig­ures.

ECO­NOMIC CON­FI­DENCE IN­DEX

Mi­croe­co­nomic ac­tors are the back­bone of eco­nomic ac­tiv­ity within a coun­try. There is no doubt that their in­di­vid­ual strength and the con­fi­dence they give to mar­ket dy­nam­ics stim­u­lates eco­nomic growth and de­vel­op­ment. Ac­cord­ingly, when eco­nomic ac­tiv­ity at the busi­ness and house­hold level slows, macroe­co­nomic in­di­ca­tors soon tend to move to­ward a con­trac­tionary phase. That is to say, macroe­co­nomic sta­bil­ity and ex­pan­sion are di­rectly linked to the per­for­mance of mi­croe­co­nomic ac­tors.

Fig­ure 1 gives an idea of how firms and house­holds eval­u­ate the cur­rent cir­cum­stances in the mar­ket. Al­though the down­ward slope in the eco­nomic con­fi­dence in­dex be­tween Jan­uary and March later im­proved, there was a roughly 10 per­cent de­crease over the course of the first eight months of 2015.

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