Turkish economic data & news wrap-up
Here’s my take on some of the recent data & news events of the last couple of weeks:
First, everyone, including yours truly, concentrated on the growth numbers, but it is the adjustment process that is equally important. To recap a point I have made several times in my columns and posts, Turkish growth is unbalanced between domestic and external demand. This is the driving force between the current account deficit.
The second quarter growth figures tell us that the adjustment has started, but was very slow in the second quarter.
Early indicators such as the imports VAT I mentioned in the last column hint that it is now gaining pace.
Changing gears, another important development was the Central Bank’s rates decision. The Bank offered no surprises, touching neither the policy rate nor the reserve requirement ratios, or RRRs, but it was the language I found most intriguing:
First, the Bank is putting more emphasis on the slowdown:
Recent data releases suggest that there will be a notable reduction in economic growth in the second half of the year. External demand remains weak, and domestic demand continues to slow down. The deceleration in credit growth and domestic demand combined with the exchange rate movements have been contributing to the rebalancing of domestic and external demand. Accordingly, the Committee expects a significant improvement in the current account balance in the forthcoming period.
This is more or less what your friendly neighborhood economist has been arguing in his last two Daily News columns as well. But then comes the more intriguing part on FX pass-through:
The Committee has noted that core inflation may continue to rise in the shortterm. However, due to the slowdown in economic activity, it is expected that the second round effects of exchange rate movements would be limited, and thus the increase in inflation would be temporary. Accordingly, the Committee has indicated that inflation outlook for the end of 2012 is consistent with the 5 percent target.
So if the Bank thinks that FX-induced inflation is temporary, why is it so worried about lira depreciation? And why did it sell USD 350mn at Tuesday’s auction, with demand at USD 850mn.
Then, there is Turkey’s so-called ratings upgrade. But my last post was about that, and next week’s Hurriyet Daily News column, which I already sent to my editor, is an elaborate version of that, so I will leave that for now.
Finally, some nice Turkey reading: An issue that did not get much coverage in the Turkish media, let alone foreign outlets is the boards formerly known as independent. My own little newspaper was one of the few ones that covered it back in August, and I got an interview request from Business News Europe a couple of weeks ago, which turned into a well-written article. BTW, just for the record, I did not call all Turkish journalists morons. I corrected the quote when the author got back to me to confirm:
“I work with a lot of smart journalists/media people in Daily News, and they actually reported it, so I would like to rephrase my moron sentence a bit. “There are a lots of morons in Turkish media”; the other sounds as if all of them are morons. And you are more than welcome to mention the one of the few articles that actually mentioned in: None other than my own little paper:):):)”
But there was a miscommunication, and my quote was not corrected:( Anyway, I recently found out that Euromoney’s new outfit Euromoney Country Risk, or ECR, published a piece on the same issue as well. So my sincere congratulations to BNE and ECR, as well as HDN of course…
That’s all for now, folks:)…
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