We enjoyed some positive developments about the budget and current account deficit over this month. The only thing that seemed rather confusing in September, where international institutions delivered positive messages about the foreign currency reserves, was statements by the Banks Association of Turkey and the BRSA about the non-performing loans.
I think we should find it rather natural that the recent rate cut by CBRT was a key agenda topic in Turkey for a while. CBRT’s move, however, wasn’t unexpected at all. As I mentioned in my previous reports, I expect policy interest rates to fall to around 13-14% in 2020. Obviously it is always inflation rate and GDP growth rate that determines the trend, or decline in interest rates.
We can observe that public foreign currency-denominated borrowing keeps growing while private sector’s external debt declines. I had the chance to ask some of the economy officials about this phenomenon when we met two weeks ago. They told me that they would arrange the borrowing process according to interest rate level and foreign currency type.
“International institutions finally come around…”
As for Turkish Foreign Trade, it can be observed that there is an increasing deterioration in export performance. Nonetheless, we should not underestimate the fact that Turkey achieved an increase around 3% in its export performance, considering that even the U.S. and China had huge difficulty raising their export performances while Japan failed trying. However, export volume doesn’t hit double digits anymore due to price competition and decline in Euro/Dollar parity. Although tourist season doesn’t end in fall, foreign currency income will probably show a degressive trend, which means we should expect fluctuations in exchange rates.
International institutions that surprisingly declared, at the beginning of this year, that they were predicting a decline by 2.5% in 2019 Turkish GDP growth are now forecasting that Turkey’s GDP growth would remain around 0%. As I’ve been expecting the same GDP growth rate myself, I will continue to keep it unchanged, yet preserve hope. Obviously, at the beginning of this year when I said I’ve been expecting around 0% GDP growth, people chose not to believe me, most of which people were Gen Y, not Gen X. So, I think we may assume that previous experiences always help you be proved right in the medium-long term.
I, personally, will keep listening to all opinions and ideas, try to appreciate, even promote, the ones that seem useful for everyone.