It will be quite useful if the TURKSTAT releases GDP figures adjusted to extraordinary movements in gold trade.

The Turkish Statistical Institute (TURKSTAT) has to assume a major role concerning the gold trade issue. Here is the story according to the press: to pay for the crude oil and natural gas imports from Iran, Turkey deposits money at a domestic bank on behalf of relevant exporter company. Since Iran is not able to fully benefit from the international transaction system, the exporter company asks the bank to transfer the payment in gold. The relevant bank imports gold for Iranian companies’ accounts and transfer the gold to Iran.

Figures mask the reality
Here is the case concerning Turkey’s growth rate: first, if gold is imported and exported within the same quarter, growth rate won’t affected by this transaction. Second, if the time interval is expanded, say from the second half of 2011 where gold imports peaked above the normal to the mid-2012 where gold exports reached above the normal, the anomaly in both ends will cancel each other out and growth outlook won’t be affected again. In other words, the gold trade will not distort growth.

But we are closely interested in the growth dynamics over the second half of 2011 and 2012. During 2010 and the first half of 2011, the economy heated up significantly. Concerns were raised on the resulting vulnerability (high current account deficit). Therefore, we now want to know to what degree the economy cooled during the second half of 2011 and the first half of 2012. In other words, the rate of economic growth in each quarter is of significance for analysts and more importantly for economic policy makers.

However, abnormal movements in gold trade in different quarters mask the “actual” growth dynamic. Extraordinary gold imports took place in the second quarter of 2011, indicating that if no such abnormality existed growth rate in the same period would have been much higher than the reported rate. Similarly, extraordinary gold exports that took place in the first half of 2012 reveal that growth rate would have been much lower otherwise. This is the third point to state.

In the end, as I also stressed above, first importing and then exporting gold at large quantities over a long period don’t make Turkey richer or poorer. But if the Central Bank (CBT) is devising its monetary policy on the basis of quarterly growth rates as well as other indicators and puts special importance on the former component of the series, which it seems to, extraordinary gold import and export figures confuse us all. Let’s assume that the CBT was aware of this from the start. But how about the public? Evidently, the people, of whom the CBT tries to shape the expectations, are not aware of this. And this poses the risk that the current or future decisions of the monetary authority might not be understood.

So if stories in press about the payment in gold issue reflect the reality and if this trend will prevail, it will be quite useful if the TURKSTAT releases GDP figures adjusted to extraordinary movements in gold trade. This way, a more solid assessment can be made on the changes in growth rate. If the analyses and stories highlighted by the media are incorrect, then just forget about this article. In any case, however, they owe us an explanation.

This commentary was published in Radikal daily on 14.07.2012