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The Kapali Carsi

Weekly Hurriyet column: Infidel-bashing, the government’s new pastime

Let today be known as the day of the three columns, similar to the year of the four kings– Gosh, even I wonder sometimes where I find these quotes from these obscure movies:) Anyway, today is the day of the three columns because there are three versions of this week’s Hurriyet Daily News column. There is the original version below. Then, there is a print-copy version: The paper is undergoing significant changes (more on that below), and so for unforeseen reasons, the econ. editor had to cut the column a bit. But then, the technological infrastructure is undergoing changes as well, and some of the column disappeared while it was being put on the web…

BTW, the astute reader might have noticed that I am not saying Hurriyet Daily News & Economic Review, because the Economic Review is no more!: The paper, which has a new editor-in-chief since May 1st, is now called Hurriyet Daily News, with a special emphasis on the Daily News part. Fortunately, only the name has gone; the economics section has been kept; otherwise, I wouldn’t be writing for the paper any more:), but it has been somewhat shortened and it has moved to the inside pages from its regal place at the back. While selfish-thinking would let me look down upon these changes:), I do have to admit that they look quite good. And once the technical glitches are fixed, we’ll be rock and rolling:)…

Anyway, there are important content changes to the column as well: The editor-in-chief noted, in his latest editorial, that he aspires for a paper with more regional coverage. Although I am not sure which countries the region includes:), I am looking forward to this change, especially if it will allow me to write more non-Turkey stuff. Just so you know the history, when I started out with HDNER, the econ. editor asked me  to write global economics, but the then-editor-in-chief decided it would be better if I did the Turkish economy. He had a point, after all: Our readers, especially the expat. crowd and foreigners interested in Turkey, probably get their global econ. coverage from the Financial Times. There was no way I could compete with Martin Wolf!:) But regional coverage seems like a great idea. Heck, I could even do one Turkey column and one regional column a week, sort of as Martin Wolf does with his Wednesday global, Friday U.K. coverage… I could sort of me a mini-Wolf:):):)…

Anyway, sorry for the ramblings; I just felt a bit chatty:) Coming back to the column, there will be an addendum, where I will discuss three more potential areas in the Staff Report that might have pissed off the government. It should be up in the next twelve hours. And having said that, on to the column:

 

It seems that infidel, or gavur as known in the ruling Justice and Development Party circles, bashing has emerged as the government’s new pastime.

Soon after criticizing the Economist for endorsing the Republican People’s Party, Prime Minister Erdoğan struck out at the credit rating agencies at an elections rally. He was right in stating that the agencies had lost a lot of prestige during the crisis, but his response came right after Moody’s warned that the current account deficit was preventing a ratings upgrade.

But the most interesting example of gavur-bashing was lost in the turmoil following the publication of the Economist article: Speaking at the awards ceremony of the Society of Economics Journalists, economy tsar Ali Babacan was unusually critical of the International Monetary Fund, or IMF.

He defended the decision not to approve the publication of the Fund’s latest Staff Report on the Turkish economy, which has been delayed by the government for the past few months, noting that it was a subjective report written by rookie economists, and that it was a “right” of the government to withhold approval.

His remarks are responsible for the PSD, that is post-elections stress disorder, that I have been suffering from since I cast my vote. I was really looking forward to the elections, with hopes that the Report had been put on hold temporarily, and that it would be released after the elections. Now, I am not so sure, especially after Babacan boasted, at the same meeting, that they had decided to withhold four or five IMF reports in the last decade.

But it is possible to guess what the government found so appalling without actually seeing the Report. They don’t say IMF stands for It’s Mostly Fiscal for no reason: I am pretty much sure that the government’s decision not to approve the publication of the Report has to do with disagreement on fiscal policy.

For one thing, the government has been claiming for a while that the fiscal stance is tight, and probably encouraged by the Central Bank’s reticence on the matter, most Turkey economists have bought the claim.

I would beg to disagree. The headline figure looks good, but at the end of the day, the IMF-defined primary balance, which excludes interest payments and one-time receipts from the budget balance, is no longer in surplus. This is mainly because non-interest expenditures have increased from 18 to 22 percent of GDP, mainly on the back of an increase in social security transfers.

Moreover, most of the improvement in the budget is coming from the jump in revenues. This is quite normal, given the strong growth performance, but that hardly qualifies as tight fiscal policy. More interestingly, there are risks to the revenue outlook as the economy slows down- unless the government suddenly (and miraculously) gets better at collecting taxes.

Finally, there seems to be a general confusion about fiscal policy: There is no magical number above which it is deemed tight. The fiscal stance needed for a country with signs of overheating and a large current account deficit is much tighter than what the government is planning for this year.

And even if you take Babacan’s word that the income from the tax amnesty will be saved, that would not really do much good in terms of restraining domestic demand, although spending it would free the fiscal genie out of the bottle.

If your friendly neighborhood economist can see all this, I am sure that IMF economists, even rookie ones, can see it as well. I can understand the government’s frustration even if only one of these points made it to the Staff Report.

Now that I have disclosed what is in the Staff Report, I wonder if the government will try to zip me as well.

 

Emre Deliveli is a freelance consultant and columnist for Hürriyet Daily News & Economic Review and Forbes as well as a contributor to Roubini Global Economics. Follow his blog at http://www.economonitor.com/emredeliveli/.

It seems that infidel, or gavur as known in the ruling Justice and Development Party circles, bashing has emerged as the government’s new pastime.

Soon after criticizing the Economist for endorsing the Republican People’s Party, Prime Minister Erdoğan struck out at the credit rating agencies at an elections rally. He was right in stating that the agencies had lost a lot of prestige during the crisis, but his response came right after Moody’s warned that the current account deficit was preventing a ratings upgrade.

But the most interesting example of gavur-bashing was lost in the turmoil following the publication of the Economist article: Speaking at the awards ceremony of the Society of Economics Journalists, economy tsar Ali Babacan was unusually critical of the International Monetary Fund, or IMF.

He defended the decision not to approve the publication of the Fund’s latest Staff Report on the Turkish economy, which has been delayed by the government for the past few months, noting that it was a subjective report written by rookie economists, and that it was a “right” of the government to withhold approval.

His remarks are responsible for the PSD, that is post-elections stress disorder, that I have been suffering from since I cast my vote. I was really looking forward to the elections, with hopes that the Report had been put on hold temporarily, and that it would be released after the elections. Now, I am not so sure, especially after Babacan boasted, at the same meeting, that they had decided to withhold four or five IMF reports in the last decade.

But it is possible to guess what the government found so appalling without actually seeing the Report. They don’t say IMF stands for It’s Mostly Fiscal for no reason: I am pretty much sure that the government’s decision not to approve the publication of the Report has to do with disagreement on fiscal policy.

For one thing, the government has been claiming for a while that the fiscal stance is tight, and probably encouraged by the Central Bank’s reticence on the matter, most Turkey economists have bought the claim.

I would beg to disagree. The headline figure looks good, but at the end of the day, the IMF-defined primary balance, which excludes interest payments and one-time receipts from the budget balance, is no longer in surplus. This is mainly because non-interest expenditures have increased from 18 to 22 percent of GDP, mainly on the back of an increase in social security transfers.

Moreover, most of the improvement in the budget is coming from the jump in revenues. This is quite normal, given the strong growth performance, but that hardly qualifies as tight fiscal policy. More interestingly, there are risks to the revenue outlook as the economy slows down- unless the government suddenly (and miraculously) gets better at collecting taxes.

Finally, there seems to be a general confusion about fiscal policy: There is no magical number above which it is deemed tight. The fiscal stance needed for a country with signs of overheating and a large current account deficit is much tighter than what the government is planning for this year.

And even if you take Babacan’s word that the income from the tax amnesty will be saved, that would not really do much good in terms of restraining domestic demand, although spending it would free the fiscal genie out of the bottle.

If your friendly neighborhood economist can see all this, I am sure that IMF economists, even rookie ones, can see it as well. I can understand the government’s frustration even if only one of these points made it to the Staff Report.

Now that I have disclosed what is in the Staff Report, I wonder if the government will try to zip me as well.

Emre Deliveli is a freelance consultant and columnist for Hürriyet Daily News & Economic Review and Forbes as well as a contributor to Roubini Global Economics. Follow his blog at http://www.economonitor.com/emredeliveli/.

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