Hiding statistics won’t prevent a crisis
If I lived in a “normal” country, I would have devoted this column to Angus Deaton, who won the Nobel Prize in Economics on Oct. 12. But I don’t, and so I need to cover the “normally boring” Medium-Term Economic Program (MTEP), which was published in the Official Gazette on Oct. 11, instead.
Interestingly, the Gross Domestic Product (GDP) projections in the MTEP were reported not in nominal, but purchasing power parity (PPP), dollars – which takes differences in costs of goods and services into consideration. PPP-adjusted GDP per capita is expected to hit $20,000 next year.
According to the MTEP, there has been a significant degree of volatility in the currencies of all emerging markets, including Turkey, and this new approach reflects the comparative well-being of countries better. To make sure that dollar-GDP forecasts cannot be deduced from lira-GDP figures, the lira-dollar exchange rates are absent as well.
Luckily, you do not need to be a Nobel Economics Prize winner, or even an economist for that matter, to calculate the government’s exchange rate and dollar GDP projections from the numbers in the MTEP: The government foresees GDP to be slightly above and below $700 billion for this year and the next, respectively, before rising to $800 billion in 2018.
I know I am repeating myself, but interestingly, when Prime Minister Ahmet Davutoğlu announced the government’s structural reform strategy in November of last year, he had claimed that GDP would be $1.3 trillion in 2018. Third time’s a charm, and so yet again, interestingly, last year’s MTEP, which was published only a few weeks ago in September 2014, envisaged 2017 GDP at $971 billion. I don’t know about you, but I am really confused.
It is also straightforward to calculate GDP per capita – which is expected to fall from nearly $10,500 last year to around $9,000 this year – and you can now see why the government chose not to report nominal dollar statistics. But Finance Minister Mehmet “Nominal” Şimşek used to claim, using figures in dollars, that Turkey’s GDP per person had tripled from 2002 to 2012. Well, according to his methodology, the country’s GDP per capita will have fallen 15 percent this year alone.
And mind you, these numbers are based on the government’s own growth projections, which are extremely optimistic: 4, 4.5 and 5 percent growth for the next three years, on the assumptions that the impact of the Fed’s rate hikes will be limited, Turks will both save and consume, and the extra savings will be channeled into investment. In addition, exports will contribute more to growth thanks to higher productivity. As a result, despite high growth, both the current account deficit and inflation will be falling. And before I forget, the lira-dollar exchange rate will be 3.09 on average next year, 3.25 in 2017, and 3.30 in 2018.
Again, you don’t need to be a Nobel Economics Prize winner, or even an economist, to notice that these assumptions are completely unrealistic. Besides, you can massage the statistics as much as you like, and even stop publishing them, but the Turkish economy will continue to head toward the cliff.