Weekly Hurriyet column: Quarterly economy roundup
Below is my Hurriyet Daily News column for this week, which you can also read at the Daily News website. As I said last week, I seem to be alternating with cheesy and non-cheesy titles, so it was time for a serious one after last week’s 
As you probably know, I got proven wrong big time, but I doubt that’s because the admiral knows his metrics better than me. I’d rather say it is because he has better “connexions”, as Dickens would spell it- I am reading Bleak House ; it is impossible not to become a Dickens fan after you spend a few weeks in London. BTW, if you are wondering if I am suggesting the data got leaked to him: Absolutely!…
Anyway, on to the column:
As loyal readers would know, I do an informal roundup of the Turkish economy every quarter, around when the GDP figures are released, which is today.
I was originally going to leave that to the following week, as I was planning to write about the economic implications of Prime Minister Recep Tayyip Erdoğan’s “Arab Spring tour” to Libya, Tunisia, and Egypt. That is now for the blog, as “the admiral” managed to steal the show yet again.
After Economy Minister Zafer Çağlayan said he expected 8 percent yearly growth in the second quarter, an economist friend wrote to her clients that there was now a good chance that the actual turnout would be close to that figure. Finance professionals don’t trust the Turkish Statistical Institute to stick to its release dates, it seems.
Personally, I had some doubts about this figure, so I spent Saturday night, in my hotel room in Eskişehir, predicting second quarter growth, in part to distract myself from the agony caused by Beşiktaş’s loss in the season opener.
Three hours and a zillion regressions later, I concluded there is no way growth could be so high. My main scenario is a flat seasonality and working-day adjusted turnout, which would bring the yearly figure to 6-6.5 percent, slightly below market expectations of 6.8 percent.
But whether the minister is right and I lose the little credibility I have with my readers, or I am, and the admiral secures his reputation as a joke-maker, second quarter’s GDP is old news. The more recent real sector data paint a mixed picture: While confidence, consumption and purchasing managers indices are all falling, July industrial production and August capacity utilization came in higher than expected.
Unlike some Turkey economists, I do not expect an outright recession. The recession prediction model I ran at the end of the “misery night” is spitting out a less-than-half probability, lower than others’ similar models. However, I do expect a significant slowdown eventually: While I will probably end up constructing the formal model after the Dynamo Kyiv UEFA game, my rough calculations are putting growth at 0-2 percent for next year even without a hard landing.
While the slowdown and the current account deficit are worrisome (although the latter could be addressed by fiscal policy), I am most concerned about inflation, especially since the August figures, which were released last Monday, have indicated that the lira weakness is finally starting to bite.
My concerns have grown since the Central Bank met with bank economists last Tuesday. New measures revealed during the meeting confirm that inflation is far behind the exchange rate and the current account on its agenda. Given the global economy and Turkey’s vulnerabilities, that could make sense. But I wish they would be honest about it like the Swiss.
Speaking of the current account, the July deficit will turn out to be around $5.5-$5.6 billion when it is released on Monday. The deficit will lose pace from now on, but at this rate, it will take a long time to reach levels deemed sustainable.
Nevertheless, I am giving my forecast, if only to make up for lost credibility in case my growth projection is off.
*Emre Deliveli is a freelance consultant and contributor to Roubini Global Economics. Follow his blog, the Kapalı Çarşı, at http://www.economonitor.com/emredeliveli/.
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