My last commentary ended with the question 'What will happen in 2010?' To answer this question, it is necessary to provide growth estimations under alternative scenarios. I also pursued a similar method for 2009 at the beginning of this year. I will use that model as well for 2010. However I will start this issue on Sunday; I have to work on it a bit further. If the dominant trend in the economy is about to be replaced with another one; i.e. in turning points, it becomes harder to make estimations as mixed signals are received. This is the main reason why I postpone dealing with the 2010 estimations to Sunday.

Figures declared in the recent period suggest that the only development that can be considered pleasing pertains to export figures. In October, exports rose by 4.6 percent compared to same period last year. Export figures for the first sixteen days of November indicate that the rate of increase is at 1.6 percent. Of course making an assessment on the basis of daily data does not make any sense; however, October and November figures at least imply that no steep drops as in previous years will be seen. This was what I meant with 'pleasing'.

It is obvious that Turkey's exports in 2010 will to a high extent be shaped by external conditions. In particular the course of the growth rates of EU economies is of great importance. Exports to the EU constitute almost the half of Turkey's total exports. So, Europeans must have start consuming that we can export to them. Growth rates of the EU countries for the third quarter of 2009 are announced. According to this, EU as a whole has shifted to positive growth (by 0.3 percent). Germany, Italy and France grow while contraction continues in UK and Spain.

These figures are stated in comparison with the previous quarter. If we state the figures in comparison with the same period in the year before, as is the common practice in Turkey, we see that EU economies are still faced with contraction. Of course the pace of economic contraction decreases and positive growth for the next year is expected under any assessment method. However, the pace of the estimated growth is quite limited: 0.7 percent. This corresponds to one third of 2002-2006 average and one quarter of 2006-2007 growth for the EU economies.

In addition, the potential changes in the domestic demand, i.e. the sum of consumption, investment and public expenditures, in these countries must be analyzed. These factors are of higher importance with respect to Turkey's exports. It is foreseen that EU's domestic demand will grow by 0.4 percent, below the economic growth estimation, in 2010. More importantly, this figure is quite lower that the potential rise in EU's domestic demand.

I believe that it is obvious why I gave so much detail. Pace of the growth of Turkey's economy in 2010 will be determined mainly by three factors. First is a 'mathematical' factor as I touched upon frequently. To put it in short; as level of national income was quite low in 2009, and as national income in 2010 is divided by that in 2009 when computing the growth rate in 2010, Turkey's economy will grow in 2010 regardless of whether any step is taken or not. The other two factors are related with external conditions: Foreign demand will shape Turkey's exports. Production and investment capacity of the corporate sector will be limited more or less depending on the amount of foreign funds accessed.

The former, i.e. the course of foreign demand in 2010, depends on the path of growth to be pursued by the EU and the USA. The estimations above imply that in 2010 EU will grow considerably below the potential growth rate. The most recent forecast on the growth path of the US economy in 2010 was hidden in the statement delivered by FED President Bernanke on 16 November. Bernanke did not give the exact figures but; underlining the recent credit movements and harsh conditions in the labor market declared that 2010 growth will be significantly below the potential growth rate. In that case, if we do not concentrate our efforts to switch to new markets, we could not expect rapid rises in exports similar to that in the 2002-2007 period.

This commentary was published in Radikal daily on 19.11.2009