Eat that frog now
Mark Twain once said “if it’s your job to eat a frog, it’s best to do it first thing in the morning.” Why? Because then you can go through the day knowing that the worst thing that can possibly happen to you has already happened. It’s a perfect way to start a new era. That’s the wisdom to follow in dealing with Turkey’s mounting economic problems. Turkey has procrastinated enough in a rapidly changing world. Now is the time to stop delaying any further.
Turkey now has a new system of government where policy coordination is going to be technically easier. The Strategy and Budget Office of the Presidency alone as a policy coordination unit, is a vast improvement over what we had in the past. We are also at a stage where the new priorities of the country have to be set. Specifically, we need new growth and job creation policies.
Let me give you a few numbers. Between July 2017 and July 2018, the Turkish Lira lost 33.4 percent of its value to the U.S. dollar. Since the beginning of this calendar year, Turks have to pay 33.9 percent more to get a U.S. dollar.
The lira is going down, yet inflation is going up. Consumer prices have increased 15.85 percent between July 2017 and July 2018. Producer prices rose 25 percent during the same period. What does this mean? It means that companies are feeling even higher costs, but cannot yet pass the full impact on to their customers. But just wait. The Central Bank’s new target for the end of 2018 already looks far-fetched.
The lira is coming down and inflation is going up, while annual job creation figures are steadily declining. In January 2018, annual job creation was 1.1 million a year, and declined to 700,000 by April, according to official figures. All these figures are symptoms resulting from longstanding Turkish procrastination, if you ask me. Turkey is late to turn from leveraging to deleveraging in the corporate sector. Now is the time to tackle the malady creating all these symptoms. If we don’t, that bad cholesterol will keep clogging up our arteries.
Turkey needs a new strategy for growth and job creation. It’s obvious that whatever we had is not working. Turkey’s new plan will no doubt have to take into account the technological revolution, and plan for the long term. But in order to jumpstart the economy on a new sustainable growth path, you need to stop the bleeding first. Let me add another nugget of wisdom: “When you’ve got to eat a frog, don’t spend too much time looking at it.” Eat that frog now.