The fact that no evident recovery was observed in the fourth quarter of 2012 does not endanger the expected 4 percent growth rate in 2013
Last week two important data, capacity utilization ratio and real sector confidence index figures for January were released. As you might remember, I stated earlier that industrial output growth in November being high did not necessarily imply a strong recovery in the fourth quarter of the year. Other indicators, capacity utilization ratio for December among these, did not validate such recovery. Besides, the change in original series rather than that in the generally-misleading seasonally adjusted series, put into question the argument on a possible recovery.
No, I am not claiming that the volume of economic activity in the fourth quarter will be worse than it was in the third. On the contrary, the economy most likely recovered at a limited degree. But, the recovery was rather limited, I would like to stress. With this, the year-end growth rate for 2012 will most probably be around 2.6 percent.
Capacity utilization ratio has been decreasing year-on-year since February 2012. The drops have become steeper starting in August. Though year-on-year changes in the rate do not demonstrate U turns, I still want to take into account three-month averages as I generally do. So, here are the year-on-year decreases in capacity utilization rates: 3.1 percent in November; 3 percent in December; 3.1 percent in January. Monthly assessment gives the same result as well for January. This does not augur well for the industrial output growth in January. Yet, we need to combine the results with other indicators for a solid assessment.
Real sector confidence index improved compared to the year before both in December and January. As might be expected, the underlying reason is the relative enhancement in external conditions: there is a common belief that Europe has left behind the worst days of the financial crisis and the US has so far avoided the fiscal cliff. The debt ceiling issue is yet to be solved and the solution is constantly delayed. But at the end of the day, risks facing Turkey are less significant than they were in 2012.
The rise in real sector confidence index, although at a small degree, implies that investment appetite will soon increase. If this trend becomes permanent, finance conditions will determine to what extent the appetite will actually turn into investment. Given the objective to keep domestic credit growth at 15 percent, external finance and borrowing opportunities are of radical importance. Currently there is no problem in this regard, for large companies that can borrow from abroad, of course.
So, here are some concluding remarks: first, the fact that no evident recovery was observed in the fourth quarter of 2012 does not endanger the expected 4 percent growth rate in 2013. Second, the limited recovery in the confidence is expected to have a reflection on risk appetite after a while. Third, the volume of economic activity in January is not different than what it was in the fourth quarter. And finally, neither of these endangers 4 percent growth in 2013. For a preliminary assessment, we should closely monitor the export performance during the first months of the year.
This commentary was published in Radikal daily on 29.01.2013
