To­wards near-zero growth

Dünya Executive - - FINANCIAL CORNER -

As such, last month’s surge in real sec­tor con­fi­dence only im­plies turnover ex­pec­ta­tions are bet­ter, not that firms are ready to in­vest.

Yes, it is broad-based, and it is also the best print over the last 12 months. This is why, cou­pled with in­dus­trial pro­duc­tion and ex­ter­nal bal­ances, zero growth is in the cards for the lot of 2019.

Zero growth would be a good print. For some rea­son, the stagfla­tion-cum-re­ces­sion pe­riod that will have lasted for about 1.5 years, with re­ces­sion cov­er­ing more than half of it, didn’t go as deep as in 2008-2009. This is what we all, or most an­a­lysts, pre­dicted in the be­gin­ning any­way, but still there is the other half of the ‘pre­dic­tion’.

That en­tails a pro­longed stag­na­tion. In fact, even with zero yearly growth, and this means pos­i­tive growth in H2, the Turk­ish econ­omy is to be con­sid­ered “sta­tion­ary” for good. This isn’t equi­lib­rium; it is only a steady-state.

And this also is kind of pro­longed stagfla­tion if we con­sider a 3-years win­dow. Sta­tion­ary econ­omy, with no growth, no real loan growth ei­ther, no real in­vest­ment growth, no pro­duc­tiv­ity in­crease, no noth­ing, all cou­pled with dou­ble-digit in­fla­tion – and de­te­ri­o­rat­ing public fi­nances.

Be­cause no­body cares, or be­cause per­haps no­body can care, or be­cause pol­i­tics have al­ways the pri­macy, noth­ing ever changes. And by pol­i­tics we only mean ‘sta­bil­ity’ of some sort. The per­cep­tion of sta­bil­ity is al­ways more im­por­tant than gen­uine sta­bil­ity, and this is how pol­i­tics works.

So, in­fla­tion for ex­am­ple is in re­al­ity a buf­fer against the im­pact of all sorts of per­va­sive and in-built in­ef­fi­cien­cies. No­body wants 2-3 per­cent in­fla­tion, be­cause no­body can cope with it.

Yet, there is a press­ing need for lower in­ter­est rates be­cause the main pil­lar on which the “model” rests is in dan­ger.

With house prices that low, and un­less mort­gage rates fall per­ma­nently, the real es­tate sec­tor may in the end fall vic­tim to over­in­vest­ment.

Newspapers in English

Newspapers from Turkey

© PressReader. All rights reserved.