Since May is about to end, it is wise to stop thinking about 2009 and start to focus on 2010. Have you started to think about how 2010 might be? Today let us start doing it together. When you start thinking, you begin to evaluate better what goes around.
How can we make such an evaluation? The first question to ask might be: What can be the main parameters of the economy in the road from 2009 to 2010? In our consideration, first parameter can be the rise in foreign saving inflows toward Turkish economy. Fund inflows can gain pace gradually in line with the establishment of stability in international financial markets. But, what will be the result of this? The result of this development will be the increase in the amount of distributable funds at hand of banks. This is a good development at first glance.
Expansion of the distributable fund pool takes us to the second main parameter for 2010. What type of a behavior banks will assume in 2010? Will banks still be afraid of the corporate sector risk they carry in their balance sheets? Or will the credit stock in bank balance sheets be restructured in the second half of 2009 and thus will the corporate sector be relieved? A comprehensive credit restructuring will make it easier for banks to undertake the risk of corporate sector. Otherwise, banks will refuse undertaking further corporate sector risk. In that case, corporate sector will not benefit from the relative recovery in fund inflows. This will in turn have impacts pertaining to employment and production. Economy will bear the risk of ongoing contraction in 2010. But do not worry; such contraction will not be as rapid as in 2009. The way to prevent this is that the government, with the commitment to clean the balance sheets of banks and for instance through Loan Guarantee Fund mechanism, makes the relevant regulation. It is a positive thing to observe steps in this direction in Ankara.
Third main parameter will be the public budget performance. Should budget deficit continues to go up due to structural reasons; the impact of the expansion in distributable fund pool will be limited further. Public sector's excluding private sector from financial markets, an incident we used to be familiar with, can gain prevalence again. And this is bad. This is bad, because, it will create a negative impact on growth. The way to prevent this is the character and the credibility of the regulation considering fiscal rule and medium term fiscal framework. IMF will play a critical role over this process.
Fourth parameter to be addressed when thinking about 2010 is related directly to domestic demand. It is not enough to implement a supply-oriented measure about the corporate sector. Supply and demand must be handled simultaneously. If the loss of the people that lost their jobs within 2008-2009 period can be compensated by not a permanent but a temporary method, a positive impact with regard to domestic demand can be created. As can be noted, the fundamental duty here must be undertaken by the executive body. It should be kept in mind that the IMF agreement in particular will be beneficial in this sense.
By the way, crisis periods do not completely evaporate the wealth accumulated during the preceding period of prosperity. Among the factors that enables recovery after the crisis period is that part of the accumulated lost that is not evaporated. And all types of consumption campaign that will stimulate this accumulation and everyone's participation into this campaign will only be beneficial. Communication campaign " there is crisis, there also is remedy" launched by a series of institutions with the leadership of Union of Chambers and Commodity Exchanges of Turkey (TOBB) on Friday can be considered in this framework. Trade associations and NGOs are doing all they can in this context. Activation of postponed demand is not bad; it is good. Confidence raising measures to be taken by the government accelerates this activation. And this is the fifth factor.
Now, what is the conclusion to be drawn? In our consideration, two conclusions can be drawn: First, it is possible that 2010 contains positive growth. Second, to ensure positive growth in 2010, everyone has to do their part. It is important to establish a harmony among producers, consumers, banks and the government. Third, it should be kept in mind that what one is able to do to fulfill its role can differ from what another is able to do. The situation is just as in Orwell's Animal Farm: All people are equal, but some people are more equal than others. In this context, the biggest role to turn 2010 into a year ensuring positive growth must be assumed by the government. This is what we get from the dynamics of the current process. Fourth, this crisis we are trying to understand the dynamics of already puts to the forefront at the global level the need for active public intervention. What did Roosevelt said? This is a period of brave and insistent trials. This is what policy activism means. What happens here is not different from what happens in the rest of the world. Fifth, the IMF plays a central role in this picture. This is a definite certainty for Turkey case.
If the government will go on demonstrating the "deeply sleeping beauty" portrait during the rest of 2009, it will be wise to expect negative growth as well in 2010. But do not worry, thanks to the factors we have listed above, potential contraction in 2010 will be more limited.
If the government will go on with the inertia, it will be wise for Turkey to forget about 2010 and start thinking over for 2011. In that case, Turkey will be disassociated from developed countries in real terms. We might have to find a place around the 20th rank while we are trying to join the group of biggest 15 economies of the world.
To whom this might concern.
This commentary was published in Referans daily on 23.05.2009
