Economic improvement should be hung on by a thread…

Yesterday, I’ve shared with you my expectations for Turkey’s GDP growth. Now, it’s time to tackle two important details: things that are beyond our power and things that are within our power.

I expect that Turkey will show a poorer economic performance in 2020, at least 30% less than the previous year, especially involving exports and tourism, two main foreign currency earning activities, and finish the year with a GDP growth around 0% if a second wave of coronavirus does not strike. Turkey will surely do the best it possible can to achieve this performance, there, however, will be some things far beyond human control.

According to my estimation, Euro/Dollar parity will continue to rise as soon as EU starts offering new funds and incentives. Meanwhile, there is complete chaos and mayhem in the U.S. Considering the fact that 50% of Turkish made goods are exported to the EU, I might say that USD-denominated export revenue will go up. A sharp decline in the parity, as low as 1.08, after its stable level of 1.30 in 2018, had caused that USD-denominated export revenue to go down as well. An increase in parity is definitely good news for Turkish foreign commerce which has been struggling because of the coronavirus.

On the other hand, investors are focusing on BIST due to recent taxes levied on Dollar and Gold. Last week, we have seen a substantial rise in the demand for stock account openings as well as analysis softwares. There are the signs showing that retail investors are directing their attention to the BIST. A strong stock market is a morale booster for the companies indeed.

“Surprises should work in our favour…”

In the meantime, I highly recommend that you should keep a close track of oil and commodity prices. As Turkey’s economic growth closely depends on its import performance, a global upward trend in input prices, especially now when Turkish exports are struggling, may cause Turkey to run a larger current account deficit, which would consequently put pressure on FX rates. Giving the fact that it’s not so easy to have a good growth performance without ensuring that at least 50% of foreign trade is carried out through transactions in national currency units, we can only pray that the following things will never happen.

  • Second wave of COVID-19
  • US-led problems
  • Snap Election
  • Further escalation in Syrian and Eastern Mediterranean conflict
  • Cul-de-sac conditions for foreign fund flows
  • Rise in Oil and Commodity prices
  • Re-ignition of conflict between the EU countries about fund procurement

As it might be seen, anything that is beyond or within our power, except for the economic issues, will have a major impact on Turkey’s economic improvement. So, we better get ready for a delicate process.