What lies ahead?
This month, we experienced a period in which we followed positive developments regarding the budget and the current account deficit. In fact, the only development that confused people in September, when international institutions gave positive messages on Foreign Exchange Reserves, was the statements of the Banks Association and Banking Regulation and Supervision Agency on non-performing loans.
We have to take for granted that the Central Bank’s interest rate cuts will be at the top of the agenda for a while. However, the Bank did not make an unexpected move. I expect the policy rates to fall to 13-14 percent by January 2020. The course will determine developments related to inflation and growth, or the rate at which interest rates will be cut.
Public borrowing in foreign currency is increasing while the external debt of the private sector is decreasing. I asked about this situation when I met the authorities two weeks ago. “We will borrow at whatever interest level is appropriate in whatever currency,” they replied.
International organizations surprise us
When we look at the foreign trade side, I can say that we witnessed a gradual decrease in the growth rate of exports. Still, the three percent increase in exports is no small feat considering the United States barely increased, China had difficulty and Japan failed to increase. However, due to both price competition and the decline in euro/dollar parity, export increases are not double digit as before. Although the tourism season does not end with autumn, it can be said that foreign exchange income will continue with a “diminishing increase.” In this case, we are likely to expect fluctuations in exchange rates.
Surprisingly international organizations, which stated that they predicted a 2.5 percent contraction 2019 at the beginning of the year are now making forecasts around zero percent. Since I have been expecting this since the beginning of the year, I am not making any changes and I continue to maintain my hope. Of course, when I voiced my expectation at the beginning of the year, there were people who opposed it. I see that most of those are from Y generation, not X. That is to say, previous experiences justify the person in the medium and long term.
I will take care to listen to all kinds of opinions that are contrary to or complimentary to my own, and will continue to evaluate the useful ones.