Growth forecasts of the Medium Term Program (MTP) for the 2010-2012 period is as follows: 2010: 3.5 percent, 2011: 4 percent, 2012: 5 percent. If these forecasts are realized, growth rate will be below the potential growth in the first two years of the program and that will approach the potential in the last year of the program.

We know on the basis of the global experience that reduction of unemployment to low pre-crisis level takes longer than the rise of national income to high pre-crisis level. In line with this experience, MTP estimates unemployment rates over the program period as follows: 14.6 percent in 2010, 14.2 percent in 2011 and 13.3 percent in 2012. Before the crisis, in 2007, unemployment rate was 10.3 percent.

In brief, the program foresees that the potential growth rate will be reached in three years and unemployment rate will be three points above the pre-crisis level, let alone reducing the rate below that level. It is doubtless that these forecasts will be realized under the assumption that fiscal and monetary policies set in the program are implemented. Variables under the fiscal and monetary policy (budget expenditures, tax rates, interest rates) constitute the 'control' variables of the economy administration. In addition, structural reforms will aid the realization of the forecasts.

There also are fundamental assumptions regarding external conditions. A part of these, Turkey cannot affect with monetary and fiscal policies. For instance, energy prices; interest rates in developed countries; and the pace that developed countries will recover from the crisis. Among the variables that Turkey can affect are the future expectations of economic agents. Therefore, confidence in the economy and risk premium can change in any direction depending on the economic policies Turkey will implement.

If the present economic program ends up credible, it can change the external conditions of the second type, in Turkey's favor. For instance it will reduce the risk premium and thus level of real interest rates; because credibility of the program will ensure that businessmen will be more secure about the future and thus invest more. Banks will revise their credit policies and extend credits more easily with the reductions in perceived risk. Consumers that did not lose their jobs because of the crisis will take the chance of spending as the risk of losing their jobs will be reduced.

Therefore, a fundamental precondition for these is: for the variables we can control (primary budget balance, some structural reforms), levels promised for 2010-2012 period must be 'viable' or 'attainable'. As I touched upon in my previous commentaries, there is no problem in this regard. The second fundamental precondition is that growth and unemployment rate forecasts set in the MTP must be in line with the promised levels for the control variables. It seems that there is no problem also in this regard; set apart the conditions we cannot control.

The third main precondition is as to whether or not we can maintain the control variables, i.e. monetary and fiscal policy variables, at the promised levels over the 2010-2012 period. And there is no guarantee for that. If medium term fiscal rule arrangement was introduced on the basis of a solid legal framework; we would be relieved in this respect. Moreover, discussions on the Central Bank's independence launched by a highly senior official leads to question marks about the values control variables will take.

Under these circumstances, credibility required by any economic program, is harmed for the OVP from the very beginning. It is a sort of 'shooting himself at the leg' situation. On the other hand, if we did not make such confusing statements, and if we also made progress in terms of the legal framework of fiscal rule; the only risk we will face in terms of accomplishing our targets and forecasts will be the external conditions that we cannot affect. What is more, there are also ways to reduce the impact of negative external conditions. I will touch upon these later.

This commentary was published in Radikal daily on 24.09.2009