Turkey Economic Data & News Wrap-Up
Here’s what is going on in Turkey regarding the economy for the past few days:
First, last week’s March unemployment data turned out to be rather strong and gives clues on why the AKP did so well in the elections:
Roubini’s in-house Turkey economist David Rogovic argues, in the latest Europe weekly, that a wage-price spiral is forming, one which will ultimately force the CBT to hike rates. I am not sure, not because I find fault with his logic, but because I don’t trust the wage data much. In any case, the CBT is likely to play down this data, saying that the increase in labor participation is keeping the slack in the labor market:
OK, but employment growth is really strong, and industry is now back where it was at the onset of the crisis (agriculture is just standard crisis affect; services is much more puzzling, BTW):
At the end of the day, the strong labor figures mean that people have more income to spend, so even without a wage-price spiral, it will contribute to demand pressures building up…
Second, as usual, fiscal optimists claim that last week’s May figures point to a very strong budget. I would beg to disagree, as my arguments from previous week’s column hold: I.e., the primary expenditures are strong & most improvement is coming from the revenue side…
…and that the IMF-defined primary balance is still in negative territory, once you leave the TRY 2.5bn from the tax amnesty out:
Now, many columnists have taken up the government’s word that the amnesty money is being saved, but I see no proof of that in the accounts…
Third, the banking regulator finally supported the CBT’s credit-curbing measures with an over-the-weekend rise in the provisioning requirement against genera-purpose consumer loans (excluding automobile and housing loans) to 4% from 1% and to 8% for NPLs.The risk-weights that apply to the calculation of CARs for these loans have been increased as well.
The exclusion of housing and auto loans have led to speculation that there are measures for these loans in the pipeline as well. All the latest macro-micro prudential measures gossip is in an excellent note written by Ozlem Derici of Erste Securities, but here are my general comments on the measures:
For one thing, the government seems to be going for measures that target the private sector rather than put the burden on adjustment on the government. I have no problem with that, except that they’d have to be measures that target the consumers directly rather than the banks to be effective, and these first measures are not. In other words, the government is attempting to target the problem with supply-side measures, whereas the real problem lies in demand. Besides, these measures are affecting the price of credit, whereas it is the income that should be targeted- note that the amnesty, if not spent, is a move in the right direction in this regard. Finally, these measures remind me of those neat Calvo-style macro models: Expected changes in such measures have the opposite effect: They can actually bring consumption forward, so if I were the government or the BRSA, I would act fast!
Last but definitely not the least, in a filing submitted to the Public Disclosures Platform, Tuborg revealed that the company had signed an agreement with Anheuser‐Busch to import Leffe and Hoegaarden. The best econ. news of the week, especially as the latter would go so well during the hot summer months!…
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