Let’s make some analysis before the soon to be announced inflation rate…

Inflation rates are going to be released a 15 mnts after you read this report. No one has positive expectations. However, I find it necessary to make one last analysis before the release.

When we look back at the beginning of 2018, we can see that, we had hope, even if it was a little hope, for in improvement in inflation, exchange and interest rates. However, the trio has unfortunately hit such high levels we had foreseen yet never actually wished for. Started to rise towards the end of the last year, inflation rates first seemed like they were calming down at the beginning of the year but then got worse with sharp ascents during the first quarter and second quarters. Interest rates too showed a coordinated rise with the inflation. And sharp rises in exchange began to emerge during the summer, bringing direct impacts on prices.

As a matter of fact, USD/TRY has showed a stable trend between 2.95- 3.00-3.10 from September 2016 to October 2017. Turkish economy managed to stand strong despite the 15 July failed coup attempt’s side effects which have been deeply detrimental to the global perception of Turkey. Interest rates remained stable within a bandwidth of 10% to 11% while inflation has stood at 9-11%.

Something happened during the last few months of 2017, resulting in a big mess that we have been trying to eliminate up until today. Diplomatic conflicts, wrong choices regarding the use of funds, the Trump factor, pastor crisis… They all have caused Turkey to get stuck in a vicious cycle of financial challenges. Nevertheless, I think neither large amount of resources nor foreign funds will be the appropriate remedy to solve the situation we are in.

“Money isn’t the problem. It’s about human resources…”

I have serious doubts in my mind whether the human resources employed in Private and Public Sector are qualified enough to provide adequate support to the decision-making. It can’t be a mere coincidence that the Government has hired McKinsey to help them in budget saving. It is now clear that top officials have probably been providing misinformation about the international trade developments, inflation, interest and exchange rates in the previous periods.

Turkey, as the borrower, and the other countries, as the lenders, needed an x-ray to help them see and properly identify the present circumstances. I do not find Turkey’s McKinsey deal surprising at all considering investors’ diminishing trust in Turkey.

According to the Istanbul Chamber of Commerce (ICOC) price indices, prices kept rising in September too. We should expect a year-end inflation around 20% no matter what surprises may the CPI data may bring this morning. This is the rate projected in the YEP (New Economic Plan) anyway. So, I suggest you to consider the circumstances well before taking any action.

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