Addendum to Hurriyet Daily News column: Please don’t feed the bears!
First, the relationship between Turkish growth and current account deficit that I mention (or rather, I let Neil mention) in the column:
BTW, Neil notes, in the report, that “”fiscal squeeze at home coupled with fresh monetary stimulus in the West could still enable Turkey to pull off the gradual slowdown that most in the market seem to be expecting.” I am hopeful because weirdly enough, I believe that the fiscal squeeze will happen, and coupled with a few reforms (most notably on the labor market), Turkey could muddle through, as long as capital flows don’t come to a complete halt. But given the government’s recent track record on fiscal policy and reforms, I would have to put my money on Neil’s projection rather than mine:)…
And if you are wondering what is on the government’s agenda, I have summarized the reforms (or rather rumors of reforms) appearing at Turkish papers at a weekend post.
As for Turkish growth during the remainder of the year, I criticized Zafer Caglayan for talking about 6-7 percent growth for this year, but make no mistake: My own forecast is not much lower. I think yearly growth will turn out to be around 5.5 percent. After the 11 percent yearly growth in the first quarter, even flat quarterly growth (seasonality and working-day adjusted) for the remainder of the year would bring the yearly number over 6 percent. But as I detail in an upcoming post, I expect a small negative quarterly growth in the second quarter, and I don’t rule put two consecutive quarters of negative growth, which would officially put us into recession territory, at least according to the most common definition of the word. But my main scenario is still very low (but still positive) growth in 2012, on the order of 0-2 percent, not the outright contraction Capital Economics is expecting.
BTW, my main criticism of Caglayan & co., which I did not detail in the column, is not their growth projection per se, but their approach: They are behaving as if there are no global problems or if Turkey will not be affected by them at all. I am not saying they should panic and scare everyone, but I think the best approach would be one of vigilance: Just say that you are aware of the risks and that it is impossible for Turkey not be effected, as it is open to the world economy, but you have taken the precautions to minimize the impact…
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