Bad Turkish economic indicators constantly increasing
It is known that we were entering critical days both nationwide and globally. While this critical process is approaching, we see that data regarding Turkish economy is also deteriorating and bad signals are increasing. International credit ratings agencies have started saying that the risk perception on Turkey has increased. Expectations have risen that Fitch in October and Moody’s in December will lower Turkey’s credit rating.
We may experience the real impact of this uneasiness, which has already started affecting the markets, much more severely in the next term. Some Cabinet ministers in charge of the economy have clung to the classic politicians’ attitude about ratings agencies of “we do not recognize them.” This reminds people of politicians’ statements that that came during periods of breakdowns in the economy - this disregarding of ratings has always been a problem for us.
The expectations survey issued by the Central Bank last week also demonstrates the negative decline in inflation, the dollar exchange rate and the current account deficit.
The data released last week are further proof of the increase in bad signals. When unemployment figures are seasonally adjusted, they show a sharp worsening, and it was also revealed last week that the current account deficit figures had again started to deteriorate. The positive course in the current account deficit in the first half of the year has reversed, and the deficit is sure to increase again.
Also last week, stories that tax collection has started to deteriorate were in the newspapers. In addition to tax collection, social security premium collection has also been going through a serious decline in recent months. The most important factor in this is the new regulations to be introduced regarding tax and premium amnesties. The new laws will be enacted in September at the earliest, so it is clear that collections will remain low for a few more months. As a result, there is the possibility that the deterioration in the budget will accelerate in the second half of this year, which may be regarded as a serious danger sign in the name of fiscal discipline.
Will fiscal discipline be disrupted?
Another important factor in the decline of tax and social security premium collections is the slowdown in growth and production. The collection of the special consumption tax and value added tax was already weakening due to economic shrinkage. The latest data show that the shrinkage in growth is definite. Along with the decline in domestic demand, there is also an expectation of a decline in also exports.
Hopes for a balance to be struck between domestic and external demand, with growth depending on external demand, have also diminished. The war in our region, which has blocked key export markets, as well as the latest data coming from Europe showing economic shrinkage, are proof that exports, which were already crawling, will be negatively affected.
It looks as if the perception that “Turkey will grow 4 percent despite all its problems” will be disturbed. One consequence of the loss of this perception is the negative effect on the inflow of funds to Turkey.
Bank managers are saying that even if there may not be sharp breaks in global financial movements, low growth expectations in addition to the deteriorating data will negatively affect the inflow of funds.
I think that all of these risks can be eliminated with a normal and rational management. A growth rate of around 4 percent can be maintained through fiscal discipline and a fault-free economic management. However, the political picture, especially the possibility of bad management, points in the other direction.
This process, which we already know will be difficult, is made even more fragile with the discussions regarding the new government and regime, the general elections to be held in June, and Turkey’s foreign policy choices.