Towards near-zero growth
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.