Another Turkey wrap-up
Let’s start with the ego deflators: Your friendly neighborhood economist had to eat his words yet again right after his column was published. Before the ink had dried on his claims that recent data were not, contrary what the Central Bank was claiming, pointing to a noticeable slowdown in growth, two releases justified the Central Bank’s stance. While August industrial production, released the day my column was published, pointed to softer economic activity, current account for the same month, the next day, corroborated the adjustment scenario.
This will sound like I am a sore loser, as Yapi Kredi Research once called me, but in my defense, the data had not come out when the Central Bank made those claims. Besides, I have always been wary of Turkish data during Ramadan, and Turkish economy still looks better than most of its peers, at least on more recent data such as PMIs, real sector confidence and capacity utilization rate, to which I alluded to in the column. Here’s a table from Erste so that you can decide for yourselves:
I agree with Ozlem, who prepared this table from the wonderful TDM, that consumption is slowing down faster than investment. BTW, sorry for the table; I know it is completely illegible as it is, but click on it, and a larger version will appear.
Continuing with the latest Daily News column, which was posted here yesterday, acute readers might have noticed that while I use the core I index in one of my graphs, I quote the Central Bank, or CBT, referring to the core H index. The CBT used to prefer I as well; they have only recently switched to H, but I don’t recall of an explanation of why they switched.
Leaving trivial matters aside, I had promised to talk more about the inflation lobby. Let’s start with who they are. Here are two great specimen: Suluman the Economist and Brave Cloud, my two favorite Turkey economists. As for the answer to “why”, the only answer I could come up with is that it is easy to bash foreigners, as IMF resident rep. Mark Lewis found out the other day.
Coming back to the Central Bank’s moves two weeks ago, which I discussed in some detail in my comments to a recent guest post: I recently stumbled upon a really intresting interpretation of the moves by Tanju Gorgulu. If you don’t speak Turkish, he is basically saying that the Central Bank knew the measures would not work, but it went to signal that it is serious about the undervalued lira nevertheless, and so it came up with the ingenuous method of collecting back the FX from the very same banks it had sold the FX to.
As for my claim that inflation is not important for the Central Bank any more: Atilla Yesilada makes a similar argument, a great read if you speak Turkish.
Finally, to put the CBT’s actions in the emerging markets, or EMs, sphere: Roubini Global Economics shows the large FX sell-offs in Asia; this is basically the currency war in reverse- just remember that merely a year ago, all the central banks, including CBT, were trying to prevent their currencies from appreciating a s a result of massive capital flows. As for monetary policy, Brazil is following in the CBT’s tracks, and FT explains why (I perfectly understand the rationale, but that doesn’t mean I agree with it). And a monetary policy shift is happening in Asia as well, with Indonesia being the latest to join the rate-cutting bandwagon. Finally, FT explains why frontier markets are not following suit (there is nice graph about FX reserve depletion for EMs as well).
Comments are closed.
