It’s better to be modest

It’s better to be modest

Some politicians, civil servants, businesspeople and economists do not expect any critical economic problem this year. They are very happy and even proud of the present economic situation. This group of optimists praises economic success stories and essentially does not want to hear about any possible problems massing on the horizon in the short- or long-term future. However, there is another group who are not so happy about the present and who are making overly pessimistic projections about the future.

These two exaggerations are both unhealthy; moreover, they might both prevent any sound projection for the future, which is necessary to effect the timely use of economic policies against unexpected problems. First of all, it must be remembered that economic problems in Europe are continuing and may continue for years. The probable price increases in energy, foodstuffs and some important raw materials will, of course, add new challenges to the current problems, especially in emerging countries. All of these might have negative impacts on Turkey’s traditional export markets, as well as on domestic financial markets.

There has been a recent slowdown in the current account deficit increase but the deficit over the GDP figure is still very high. There was a new surge in inflation, which had a negative impact on inflationary expectations, but the monetary authorities have effectively guaranteed that inflation will be around 6 percent by the end of the year.

Some voices from the government side, especially from those in macroeconomic management, have given the impression that the risks ahead have been recognized. This is good news so long as that approach does not change in the coming months.

All these negative signals have not, of course, yet indicated that a serious economic crisis will inevitably strike Turkey this year. However, it is better to be ready for external shocks and for unexpected domestic problems. It must be remembered that even when there were no serious problems in the world economy, Turkey faced numerous crises because of domestic political turmoil and the implementation of irrational economic policies.

It is politically better to be modest when talking about Turkey’s success stories. It is obvious that when the world crisis began, some sectors were in better condition, especially compared with most European countries. Markets stayed calm, growth accelerated, the unemployment rate fell, a slight development in income distribution was achieved and, except for the last few months of 2011, inflation was tamed. But all these positive developments do not mean that most of the problems were solved permanently and that there will be no serious problems in the future in the Turkish economy. The current account deficit and its financing by hot money inflow still present important risks, especially when serious foreign and domestic political problems are taken into account.

In almost every country, people have short memories of distressing predictions made by politicians, especially when those ill omens do not come to pass. But they never forget exaggerated positive predictions whenever promises fall short. This always causes embarrassment and a loss in popularity for politicians who exaggerate expected positive developments.

So, if it is proper to repeat, it is better for politicians not to exaggerate but to be modest when making comments on present and expected situations.