Price raises and the Central Bank
Fatih Özatay, PhD
02 October 2012
I think, the CB will keep the average funding cost close to the policy interest rate unless exchange rate changes unfavorably. First, tax on selected goods and services and later fuel and diesel oil prices were raised. Yesterday, electricity and natural gas prices were increased by 10 percent. I addressed these developments in the context of stability and growth during Saturday’s commentary. Today, I want to evaluate these from the monetary policy perspective.
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The new challenge for Turkey: low growth, high current account deficit
Güven Sak, PhD
02 October 2012
In times of high growth and high current account deficit, we at least knew what we were faced with. It used to be that the high growth-high current account deficit duo would cause us anxiety. We wrote a great deal about it. And today, we are anxious about the possible outcomes of the low growth and high current account deficit combination. The second issue of the Economic Conditions Report prepared by the TEPAV Finance Institute has been released. The best part to me is the warning about this new combination. Why? It’s quite simple: it is a new phenomenon for Turkey. So, we want to know, first, if it is a transition period phenomenon, and second, how it can be managed. It is now better understood that economic policy management is a sort of juggling process. You have to juggle five balls a
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Why the fall in exports calls up the fiscal rule?
Fatih Özatay, PhD
29 September 2012
With a focus on the “moment” these all are right steps towards stability. From a dynamic perspective, however, these are proved wrong. There were two factors that triggered the decrease in growth rate. First, in June 2011, the Banking Supervision and Regulation Agency (BRSA) took effective steps to slowdown the credit growth. The second factor related to the problems across Europe: with uncertainty about the future of Europe escalating, risk appetite headed down. Banking and corporate sectors faced difficulty in borrowing from abroad. Coupled with the weakening of risk appetite, domestic credit demand decreased. In addition, sluggish growth in Europe affected Turkey’s export performance negatively. Please note that only the first factor is connected to the “gearing down” in fashionable ja
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Disbanding militias in Benghazi
Güven Sak, PhD
29 September 2012
If you live in a normal country, you are probably not allowed to own a rocket launcher. Last week I read in the Libya Herald that authorities in that country had decided to disband militias in Benghazi. Here is what I think about the issue: First of all, it does not look like the decision of a strong government. Strong governments, by definition, do not have this problem. Second, the decision covers Benghazi only and neglects the rest of the vast country. Third, I still consider this to be a step in the right direction. Keeping in mind the conditions during Gadhafi’s Mickey Mouse state in Libya, this is indeed a step in the right direction. It is just a pity that the decision only came after the rather tragic incident leading to the death of the American ambassador.
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If you cannot lower expenditures, update the taxes
Güven Sak, PhD
28 September 2012
The only thing that has changed, if you ask me, is that now we are calling price increases introduced to improve indirect tax revenues “updates.” To which part of the world does Turkey belong? To the First World in terms of its economy, and the Third World in terms of its tax system. If indirect taxes constitute 70 percent of the total tax revenues, then we are dealing with a Third World country. Please tell me what has changed in terms of fiscal policy in Turkey. The only thing that has changed, if you ask me, is that now we are calling price increases introduced to improve indirect tax revenues “updates.” I really love this. I feel like I have stepped into an Orwellian world. Like, we say the “Ministry of Justice” when there is no justice at all!
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The CB’s hands are clean
Fatih Özatay, PhD
27 September 2012
It seems we will be searching who did wrong as we are keenly interested in identifying wrongdoings and wrongdoers. With the economic growth in the first quarter slipping to 3.1 percent, some circles blamed it on the Central Bank (CB). But, there is no wrongdoing in this case. Even if there was, the CB was not who did wrong.
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Where did the government make a mistake?
Nihat Ali Özcan, PhD
27 September 2012
Turkey will have three different elections in three years and the PKK will exploit this process. One year ago the negotiations between the PKK and National Intelligence Service collapsed. Then, negotiation dialogues were leaked to the public. Prime Minister Recep Tayyip Erdoğan was unhappy with this leak, because it could overshadow his 2011 general election victory. However, he was able to change the “negotiation idea” in public opinion positively or at least neutrally. He achieved this by attributing responsibility for the breakdown of negotiations to the PKK. This success encouraged the government to ignore the PKK factors in the next days. Yet, the reality is that the country will have three different elections in three years like local elections, presidential elections and ge
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A fake justice system cannot build a financial center in Istanbul
Güven Sak, PhD
25 September 2012
Turkey’s justice system is not functioning properly. It is not necessary to be a defendant or a relative of one to reach this conclusion Turkey’s justice system is not functioning properly. It is not necessary to be a defendant or a relative of one to reach this conclusion. Turkey’s justice system has never functioned properly; neither in the past nor today. The difference is that, today, Turkey is making pretentions to establish an Istanbul International Finance Center. A country that has a fake justice system cannot create an international financial center. This is what the verdict in the Sledgehammer trials made me think. If the government is serious about the Istanbul International Finance Center protect, it should prove that it is with a comprehensive judicial reform project. Is that
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What are the odds that the CB didn’t know about tax measures?
Fatih Özatay, PhD
25 September 2012
The probability that the CB took its latest decisions having no knowledge of the tax revenue raising measures to come is one in thousand, if not zero. The latest tax regulations can be addressed from different perspectives. But first things first: it was a step in the right direction in terms of fiscal policy discipline. The decision proves that Turkey has learned by doing what troubles loosening fiscal policy can cause, especially if on a continuous fashion. Efforts were made to put deteriorated budget balances back on track. This was the “positive outlook perspective.”
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Why Antakya is feeling Syria’s pain
Güven Sak, PhD
22 September 2012
It is Antakya for us Turks, and Antioch to most others. The city is part of Hatay province in the southeast of Turkey, right on the Syrian border. I mostly know of Antakya through its Archaeological Museum, which contains Roman mosaics from the region. But the city is well worth a visit for other reasons as well; for example its restaurants offer a natural mix of Arab, Turkish and French cuisines. UNESCO recently named it a World City of Gastronomy. With its hospitable population of about 1.5 million, the city should be on the itinerary of any curious visitor to Turkey. These days, Antakya is the city in Turkey where you can feel the tension of the Syrian crisis the most. There were demonstrations in the town calling for an end to the military campaign against Syria. For the purpo
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