It may sound new but the New Econ­omy Pro­gram fails to ad­dress the core is­sues, again

Dünya Executive - - COVER PAGE - By Hus­niye Gun­gor

1 Em­pha­sis on fis­cal poli­cies

The in­fla­tion rate should ide­ally be low­ered below 5 per­cent, Berat Al­bayrak said dur­ing his pre­sen­ta­tion of the new pro­gram in the cap­i­tal Ankara. “We re­vised our in­fla­tion fore­cast for 2019 to 12 per­cent, down from 15 per­cent in our pre­vi­ous tar­get. Un­der these tar­gets, the pri­or­ity will con­tinue to be given to the co­or­di­na­tion of mon­e­tary and fis­cal poli­cies,” Al­bayrak said, adding that the govern­ment will back the Cen­tral Bank in its ef­forts against in­fla­tion. On the fis­cal discipline side, the min­is­ter noted that a 2.9 per­cent bud­get deficit-to-GDP ra­tio is tar­geted for the next two years while 2.6 per­cent is set for 2022. “The cur­rent ac­count bal­ance will con­tinue to be one of the main is­sues on the po­lit­i­cal agenda,” Al­bayrak said, ex­press­ing that this year will end with a cur­rent sur­plus.

2 Struc­tural trans­for­ma­tion

The min­is­ter said the struc­tural trans­for­ma­tion steps will be taken to in­crease com­pet­i­tive­ness and ef­fi­ciency in the goods and ser­vices mar­kets. Turkey’s year-end eco­nomic growth is ex­pected to be 0.5 per­cent in 2019, ac­cord­ing to Al­bayrak. Stress­ing the govern­ment’s will to get rid of the mid­dle in­come trap, Al­bayrak said Turkey aims for healthy and sus­tain­able growth rather than high growth rates. “The new pro­gram tar­gets 5 per­cent an­nual growth rate for next three years each,” he said.

3 Con­struc­tion sec­tor to in­crease em­ploy­ment

Al­bayrak said growth will also gen­er­ate around one mil­lion new jobs per year dur­ing the 2020-2022 pe­riod to re­duce the un­em­ploy­ment rate grad­u­ally. De­vel­op­ments in the con­struc­tion sec­tor and im­prov­ing bor­row­ing con­di­tions will make a pos­i­tive con­tri­bu­tion to em­ploy­ment in the short term, he added. “After clos­ing 2019 with an un­em­ploy­ment rate of 12.9 per­cent, we aim to re­duce the fig­ure to 11.8 per­cent next year, 10.6 per­cent in 2021 and 9.8 per­cent in 2022,” he said.

4 Emre Alkin: “A down-toearth doc­u­ment”

The pro­gram an­nounced last week is much more down-to-earth than the pre­vi­ous one. How­ever, we need to un­der­stand that some goals are as­pi­ra­tional and some goals are nec­es­sary. It is pleas­ing, for ex­am­ple, that growth is not pro­jected to be more than 5 per­cent, be­cause we have seen what Turkey has turned into with rapid growth. I find the un­em­ploy­ment pre­dic­tions quite re­al­is­tic. Un­less we change the cur­rent eco­nomic model, it is very dif­fi­cult for un­em­ploy­ment to fall below the 9.5 per­cent plateau. Ac­cord­ing to the pro­gram, we won’t hit that even in 2022.

5 Alkin: “Bud­get and cur­rent ac­count deficit are cre­at­ing ques­tion marks”

It is ob­vi­ous that we are en­ter­ing a pe­riod in which we should be ex­tremely care­ful in terms of the ra­tio of bud­get deficit to na­tional in­come. We see that the Min­istry of Fi­nance has de­clared that it will give a bud­get deficit well above the tar­gets in the pre­vi­ously an­nounced pro­gram. How­ever, in 2022, the ra­tio of bud­get deficit to na­tional in­come seems to fall below 2 per­cent. In the mean­time, the 3 per­cent level is de­ter­mined to be the red line.

6 Nevzat Say­gili­oglu: “Low dol­lar rates pre­dicted”

As the ta­bles in­di­cate, the av­er­age ex­change rate is taken as TRY 5.70 for 2019, 6 for 2020, 6.41 for 2021 and 6.74 for 2022. This is con­sis­tent with the min­is­ter’s rhetoric of mov­ing away from dol­lar­iza­tion, but com­pletely in­com­pat­i­ble with the re­al­ity of life. There­fore, GDP per capita is es­ti­mated to rise to the $10,000 band in the next three years.

7 Say­gili­oglu: “Un­re­al­is­tic steps in tax poli­cies”

Ac­cord­ing to the bud­get, in­ter­est ex­penses, which was TRY 74 bil­lion in 2018, will in­creased by more than TRY 100 bil­lion in 2022 to TRY 176 bil­lion. There­fore, the por­tion of tax rev­enues go­ing to in­ter­est will rise from 15.4 in 2019 to 18.3 per­cent in 2022. That is, al­most one fifth of tax will go to in­ter­est, rem­i­nis­cent of the 1990s. It is clear that very re­al­is­tic steps will not be taken re­gard­ing tax poli­cies.

8 Alaat­tin Ak­tas: “Growth is dif­fi­cult this year, 2020 is easy”

Ac­cord­ing to Al­bayrak, this year’s growth rate is es­ti­mated to be 0.5 per­cent. Our growth rate tar­get for the fol­low­ing years is five per­cent. The 5 per­cent growth tar­get for 2020 and be­yond is in­com­pat­i­ble with the cur­rent ac­count deficit tar­get of those years. Five per­cent in 2020 can be re­al­ized largely due to the low rate this year. There­fore, the more dif­fi­cult five per­cent will be in the fol­low­ing years.

9 Ak­tas: “Tourism will not com­pen­sate for the for­eign trade deficit”

The for­eign trade deficit, which is ex­pected to be $26.4 bil­lion this year, is ex­pected to rise to $47 bil­lion in 2022, an in­crease ex­ceed­ing $ 20 bil­lion. The ex­pected in­crease in tourism in this pe­riod is $17.5 bil­lion. It is as­sumed that tourism rev­enue, which will be $29 bil­lion this year, will reach $46.5 bil­lion in 2022. In other words, the for­eign trade deficit is not ex­pected to cov­ered by the tourism sec­tor.

10 Ak­tas: “Un­em­ploy­ment fore­cast is not re­al­is­tic”

To keep the un­em­ploy­ment at 12.9 per­cent an­nu­ally, the rates in Au­gust and Novem­ber should be 12 per­cent. It is un­clear how un­em­ploy­ment, which is 13.8 per­cent in the first half, will re­main at 12 per­cent in the sec­ond half, go­ing in the op­po­site di­rec­tion of the gen­eral trend.

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