Looking ahead 2

Last week, business leaders made predictions for 2019, this week it’s our columnists

1

No recession is expected in the U.S.

Sant Manukyan: “I expect the S&P index to hit rock bottom in January or February. However, neither the U.S.’s recession in 2019 nor the FED’s zero interest rate hike and a 2008-style bear market in the indices are included in my main scenario. The decrease in the impact of tax cuts in the U.S., the completion of the ECB’s asset purchases in the Eurozone, tight monetary/fiscal policies and growth in China due to the trade war and faulty investments are inevitable.”

2

Decline in dollar will be opportunity to buy

Manukyan: “The dollar could slip in the first quarter. The Democrat-controlled House in the U.S. will put pressure on Trump, both politically and economically. If the independence of the FED degrades on top of that, dollar-flight may accelerate. However, the dollar has gained value because other currencies have weaker economies or central banks. Therefore, I see weakness in the dollar as an opportunity to buy.”

3

European growth will go down to 1.7 percent

Acil Sezen: “According to Bloomberg, trade wars were like a dog barking in 2018; the bite will come in 2019. Focusing on the trade war between China and the U.S. is not enough to see the bigger picture. Germany, which has fueled a decade of growth by selling goods to China, is also slowly decelerating. In the third quarter this year, Germany’s contraction in goods exports was 1.6 percent, the lowest performance since 2012. Growth forecasts in the European economy will drop to 1.7 percent next year.”

4

Turkey to get its share from possible fund flows

Sezen: “The cooling and slowdown caused by trade wars reduces the predictability of the markets and breaks the rate of normalization of central banks. This environment can accelerate fund flow to developing markets after panic sales in the recent months are diminished or eliminated. If the fund flows are affected less by these uncertainties and return to developing countries, Turkey will definitely receive its share because because stock valuations are severely discounted according to both their 5-year averages and other developing country multipliers. ”

5

Healing period

Sezen: “A decline in the current account deficit due to the economic contraction next year, decreasing energy costs due to falling oil prices are other factors work in Turkey’s favor. If the recent detente with the U.S. is sustainable and Turkey can avoid another election cycle, the next year may turn into a year of dressing wounds for us in terms of markets. However, the recovery of the market and increase in optimism does not mean that things in the real economy will be also improve. ”

6

Domestic market will partially recover

Sezen: “The shrinkage in the domestic market will probably be with us during the first half of the 2019. In the second, there will be a partial recover. For exports, it is possible to be more optimistic. The cooldown in Germany points to a decline due to the inability to sell goods to China. Domestic demand remains strong in Germany. We will likely be able to export to Europe next year.”

7

Year of short-term investments

Sezen: “2019 is trade year, not a trend year. For investors, it will be a year where veering will be essential as opportunities occur. It may not be possible to invest in permanent trends. For savers who manage their money effectively, it will be a year of opportunities. For business representatives, it is a year to get rid of fats and depend on muscles...”

8

A relative balancing

Orkun Godek: “We expect to see the loss in growth becoming more evident in the first half of the year and a relative balancing in the second half. A similar picture is likely on the inflation front. In the first half, inflation will be around 20 percent and could drop between 15 to 18 percent in the second half. The decisive factor for both will be the lagged effects of the tightening steps in monetary policy.”

9

Making the best of a bad situation

Emre Alkin: “2019 was discussed from various perspectives at a roundtable meeting organized by one of the world’s leading economy magazines. Retail sector representative pointed out the distress in the supply channel: “We’re making a 10 percent discount but the suppliers are not.” He underlined that business is becoming unprofitable and businesspeople are very concerned about wage increase in January. He underlined that consumers are beginning to buy less while prices are rising. What I understood from the participants’ point of view was that 2019 will be difficult but structural reforms must be implemented in the process of slowing down the economy.”

10

Skepticism remains

Osman Ulagay: “Turkey maintains its bad reputation internationally. However, international financial circles that can provide outsourcing, which is an urgent need for Turkey, at this point are still skeptical about developments. At this critical point, Turkey does not have the luxury to break fiscal discipline and pull down interest rates without affecting inflation. Elections will be a destabilizing influence.