Generally accepted opinion was that we would see positive growth rates as of the last quarter of 2009 both for industrial production and national income. The main idea behind this was: we calculate the growth in the current period in comparison with the growth in the same period the year before. Turkey's economy contracted in the same period the year before. So, it is quite easy to achieve positive growth in comparison to that period. The second reason is that slow recovery was projected for developed economies as of the second half of the year. In that case, the volume of goods they imported from us would have been expected to rise.

The first data for the last quarter of the year was for industrial capacity utilization rate. To be optimistic, level of reduction in capacity utilization rate is lower than in previous months. To be pessimistic, capacity utilization rates for 2009 are lower than 2008, and 2008 rates are lower than 2007. To put it differently, factories are operating with at a much lower capacity compared to two years ago.

Here, I would like to give some technical details: Comparing the current figures with the previous year might be problematic sometimes in particular in periods where we expect a downward or upward turn in the level of economic activity. One way to overcome this problem is to make the comparison with the month before (or the quarter before for quarterly data). However, if the series we analyze fluctuate considerably for reasons other than economic reasons, this comparison has no meaning. In that case, you have to use data net of seasonal movements or the changes in the number of work days. This is a must; because depending on the method you use to eliminate the seasonal impacts, you can achieve different growth rates. Particularly when you have low rises or falls, you can easily reach a different result under a different calculation method. So what can we say in that case? Did the rate fall or rise compared to the month before? I will try to give some pleasant examples sometime.

Now it is time to ask the main question. How will the near future be shaped? This in fact contains four hidden questions: How can the foreign demand for Turkish exports be shaped? Can bank and firms access or want to access foreign funds? Will banks increase the volume of funds extended in the domestic market? How will the opinion of consumers and investors about the future of the economy be shaped?

I do not remember how many times I tried to address these in this column throughout the year. And I am sure that I will continue to seek an answer to these questions. These are extremely important for understanding whether or not we can overcome the current conditions. So, let us begin with the developments concerning domestic credits. On October 25, I have presented a table showing the rises or drops in credit volume net of inflation (real rise) compared to last year. As the table suggested, growth in the real credit volume dropped sharply as of September 2008. And as of June, real volume of credits started to fall.

As I mentioned above, comparing the figures with the year before can disguise some certain developments. A different perspective provides a more optimistic picture. The picture reflected with the weekly data is: Volume of credits dropping sharply as of October 2008 hits the bottom at the late April and rises since then. It is also necessary to assess the details of total credit volume. The details suggest: The rise in volume of credits as of the end of April was both for consumer loans and credits to corporate sector. However, the current volume for credits to corporate sector just recently reaches the peak achieved in October 2008. On the other hand, consumer loans have exceeded the peak in October 2008. In short, the locomotive is consumer loans. Again relying on the details, two factors preventing us to conclude that this development in credit market is positive can be named.

First, this development is not uniform for all bank groups. Public banks expanded the credit volume much rapidly than both private banks and foreign capital banks. In that respect, it is also necessary to find out the bank groups who received short term loans from the Central Bank. If banks that received short term loans are public banks; if the state of indebtedness is continues   and the amount of the debt rise, we have to sit down and think. It would not be healthy and pleasant if banks receive short term loans while extending long term credits does not seem to be pleasant and healthy. Second, the ratio of non-performing credits to total credit volume is rising. And there is no reason to expect that the rate will not rise further in the coming period. Though the current figures are not yet alerting; it is wise to be cautious.

This commentary was published in Radikal daily on 15.11.2009