Better late than never
We see the New Economy Program (NEP) as a step in the right direction, although it came belatedly. Unlike the Medium-Term Program announced in October 2017, the program announced in September 2018 paints a realistic path outlined for Turkey’s economy.
The NEP foresees an economy that is slowing down with a relatively hard landing and stabilizing in favor of exports. The program emphasizes a trivet to improve ther deteriorated financial stability and confidence of the markets: outward-oriented balancing, fiscal discipline, structural change.
We could be at a very different point today if we had announced such a program in the 2013-2017 period and applied it despite a busy election period and transition to the presidency, before the risk appetite for emerging markets had not been corrupted and the perception for Turkey had not worsened.
We could have remained investable grade despite the geopolitical risks in the Middle East, FETO attacks and deteriorating relations with the U.S. We would have escaped lightly the currency attack in August 2018; we would not be struggling with inflation rising to the 20 -25 percent band and the financial instability risk caused by loan rates exceeding 35 percent.
But let’s leave the past behind. The New Economy Program, despite its intrinsic inconsistencies (high private sector savings, rapid recovery in the current account balance and fastpaced Turkish lira, etc.) has been the most courageous medium-term program in the last 10 years. Therefore, it deserves to be supported. We hope it is properly applied, restoring confidence, eliminating financial instability and the risk of a hard landing for the economy.