Domestic demand to be in focus due to export problems

Domestic demand to be in focus due to export problems

Turkey is currently experiencing hard times in terms export activities. The main reason for it seems to be the ongoing decrease in demand since developed countries have not fully overcome the crisis yet.

While the latest growth numbers of the U.S. and Germany fell short of expectations, it has already begun to be said that overcoming the crisis on a global scale might take longer than predicted. For that reason, it is evident that monetary expansion will continue, while the normalization of monetary policies will be at least delayed.

Such problems in developed countries naturally began to negatively influence exports in Turkey, which normally conducts exportations to these countries’ markets. According to official data, the export rates decreased by six per thousand, while import rates declined by three per thousand in March.

In a recent statement he issued, Economy Minister Zafer Çağlayan announced that the export costs had reached 37.1 billion dollars with a 5 percent increase within the January-March period, while the imports reached 58.8 billion dollars with the same increase rate in that period. While overall export costs were determined to be 154.2 billion dollars, imports were revealed to cost 239.4 billion dollars within the last 12 months.

Çağlayan said world trade, which was stagnant in 2012, also welcomed 2013 with a bad beginning; export and import activities decreased in many countries this year. Besides, the recess in parity negatively influenced our exports, and the exports are predicted to fluctuate in the following months and recover again toward the end of the year, according to Çağlayan.

These hard times in exports are also expected to stir the exchange debates. Exporters have started to complain about the long-lasting stability in exchange rates that is deliberately implemented by the Central Bank since it caused the Turkish Lira to increase in value.
Current deficit to be on agenda
The problem in exports also brought forward the question “How will this year’s growth target be achieved?”
Economists predict that the decrease caused by foreign sales will be met with domestic demand. That is to say, in order to achieve the 4 percent growth target, more flexible policies will be implemented and the production activities will be carried out parallel to the domestic demands, according to estimations.

Consequently, the increase in credits, which would remain at maximum 15 percent according to economy authorities, will gain inevitable speed.

The primary data on the first quarter of the year show that the domestic demand began getting into motion while the production depending on domestic demands is gradually becoming prominent.

If the main focus becomes domestic demand, the debates on inflation and current account deficit would be inevitable. As a result of limitations in domestic demand, debates on last year’s growth rate, which decreased to 2 percent, and the previous year’s current account deficit remained in the background. However, with the revival of domestic demand this year, the current account deficit is expected to rise again depending on the increasing import rate.

Along with that, it is evident that the revival of domestic demand would also contribute to inflation. So, some problems are expected in reaching the targets determined by economy authorities.

Beginning from 2014, Turkey is to enter a two-year period in which at least three elections will follow each other. Even this period is evidence of a future increase in domestic demand.