Low demand hurting real economy

Low demand hurting real economy

ISTANBUL - Anatolia News Agency
Low demand hurting real economy

Tight monetary policy and increasing distrust in markets hit the real economy, according to İTO’s Murat Yalçıntaş. AA photo

The real economy in Turkey is facing difficulties not only due to the global crisis but also due to low demand in the domestic market, Istanbul Chamber of Commerce Chairman Murat Yalçıntaş has said. Economic activities have picked up moderately in the second half of the year, but there is a visible tightness in the markets, according to Yalçıntaş.

“One of the most important reasons for [this tightness] is the tight monetary policy of the Central Bank to decrease the current account deficit. Liquidity should be provided to the market to dispel tightness in no time. The Central Bank’s latest message to ‘loosen the monetary policy’ should be fulfilled,” he said in a written statement.

A new regulation regarding checks, which has created distrust in the markets, has also contributed to the market tightness, he said. “The number of bouncing checks in July increased 20 percent compared with the previous month,” he added.

“The government’s economic growth goal for this year is 4 percent. This has caused a significant sacrifice in terms of domestic demand for the real sector. If the growth rate falls to 3 percent, it could create alarming consequences. This malaise may create a risk to Turkey’s most ambitious incentive scheme, [making it] become idle,” he said.

Leading indicators in the real economy should not go unnoticed even as macroeconomic data paint a favourable picture, he said. “The industrial production and the manufacturing industry new order indices are very important [indicators] because these figures show both the current situation and what the business world expects in the upcoming three months,” he said. “Industrial production was up 2.7 percent, but the figure in the previous month was 5.9 percent. The rate of increase in the monthly new order index dropped to 11 percent in June from a band of 15 and 20 percent.”