Business world’s expectatio­ns on the economy

Dünya Executive - - COMMENTARY - Nevzat SAYGILIOGL­U Columnist

First of all, we have to underline a point: Although the main function of the Central Bank (CBRT) is to maintain price stability, it is very important that the Bank has ahd its finger on the pulse of the real sectors in order to direct monetary policies in recent years. In addition to forming and executing monetary policy, which is the means of exchange, it is meaningful to focus on issues of production, investment and employment creation.

The CBRT monitors the real sector as a separate general directorat­e with its experience­d staff specialize­d in this sector. The Bank tries to record the problems and especially the future expectatio­ns of the real sector by making visits to large corporate companies in various sectors.

Now, let’s take a look at the February 2019 real sector expectatio­n survey of the Central Bank and try to evaluate the expectatio­ns.

The inflation expectatio­ns for the upcoming 12-month period of the business world decreased from 15.91 percent in January 2019 to 15.47 in February 2019. The inflation expectatio­n for the next 24 month period was 12.00 percent in January 2019 and increased to 12.30 percent in the following month.

That is to say, the business world considers the end of 2019 to be more predictabl­e and decreases its expectatio­n for the month of January 2019 in February 2019. In other words, the business world foresees a downward trend in inflation over the 12-month period. But due to the longer-term expectatio­ns of the 24-month period, there is no serious change due to the uncertaint­y.

The dollar rate expectatio­n, which is on the radar of the business world, the person in the street, households, and the student in the university, seems to be indexed to inflation. Dollar returns or external factors are excluded. So the dollar rate for the end of 2019 is expected to be TRY 6.18 in January, while the February expectatio­n is TRY 5.99. In other words, as of February, the year-end inflation rate is estimated at 13 percent.

A similar approach seems to have been adopted for the February 2020. The exchange rate for the next year is expected to be TRY 6.30 in January and TRY 6.17 in February. It is foreseen that the tight monetary policy will be loosened and the dollar will be bolstered in February due to FED decisions.

The business world continues to be realistic in terms of growth. While the growth rate in 2019 was foreseen as 1.4 percent in January, optimism was lost in February and expectatio­n declined to 1.2 per- cent. In fact, Turkey’s 2019 growth forecast for the rest of the world and financial circles is below 1 percent. The business world forecasts the 2020 growth as 3 percent.

If we look at the numbers differentl­y, the business world is very worried about the developmen­ts in the economy. But it does not intend to lose hope in any way. The business community does not approve of a situation where police officers and the Ministry of Commerce are more likely to go down to the bazaar and conduct sudden inspection­s. These are far behind, intrusive, and contrary to the understand­ing of the market economy. Such moves clash with the current government which has strongly criticized the practices of past government­s in this regard.

Let us again consider these practices as mandatory maneuvers of local elections and wait for decisions after April 1.

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