Balancing is meaningless

According to Turkey’s economic administration, the latest data on the Turkish economy and financial market trends appear to favor balancing. I don’t think this interpretation reflects the truth. The fact is, the changes in financial trends were the result of artificial constraints while the details of the data and the impact of global developments on expectations render positive evaluations meaningless. It is not very convincing to talk about balancing under conditions where sustainability is not possible.

Recently released October foreign trade indices indicate that competitiveness in production has declined rapidly. While export unit values decreased by 2.3 percent, the import unit value index increased by 3.4 percent. Obviously, under such circumstances, where the credit mechanism does not work and cash deficit problems need to be solved in some way, businesses will disinvest and lose the profit motive. These scream that the improvement in the foreign trade front is not sustainable and does not mean balancing.

The fact that our current account balance gave a surplus in October, after surpluses in August and September, should be seen in light of these conditions. It is also necessary to take into account increasing uncertainty in our key export markets and the dilemmas regarding external financing.

Q3 f gures do not reflect real ty

Again, I do not think that the third quarter growth figures announced last week reflect the reality. The fact that the figure is below market expectations does not change my perception. Despite the very high rates of decline in durable goods sales and the acute problem in loans, it’s hard to believe that the decline in the construction sector and investments is limited to single digits. Again, for the same reasons, the increase in the outlook for private consumption expenditures, albeit limited, is not convincing.

The fact that the exchange rates and interest rates have recovered in recent months is not due to overcoming the shortage of resources and the improvement of expectations. It was only possible because of interventions and is not sustainable, although it has partially reduced the damage in the balance sheets. Such a scenario does not reduce the possibility of a new financial shock in the medium term but rather increases it. An equilibrium scenario built on artificial expectations does not mean anything other than aggravating the problems, unless the resource shortage is entirely overcome.

Turkey s a net fore gn debt payer

The irreconcilable contradiction between unsustainable trends and balancing hampers expectations for the improvement the economic management team is trying to sell. One group of them is trying to delude the people and keep up the appearance until the local elections at the end of March. Foreigners who have taken a serious risk before in our country see this period as the last opportunity to reduce their positions as much as possible. As this is the case, the Treasury’s force to lower interest rates by reducing bond sales at the borrowing tender rebounds.

Some people do not understand that moves which appear to have worked so far are not working anymore and are even beginning to cause trouble. As a result, pressures to reduce the shortage of resources causes this problem to deepen.

Global conditions continue to increase the likelihood that our economy will have to be a net foreign debt payer. In such an environment, a realistic strategy that aims at balancing should take this possibility into account. Otherwise, we face a new round of exchange rate shocks, increasing interest rates and rapid deterioration in macroeconomic expectations. If they are realistic, our leaders should set aside short-term political plans and instead focus on balancing the books.