I’ve always said that credit rating agencies’ decisions mostly serve diplomatic purposes rather than economic purposes. For that very reason, I highly believe that Moody’s decision is mainly triggered by two key factors: Turkish military operation in Afrin and existing tensions between Turkey and the US. As the decision was released quite early in the morning, it luckily hasn’t brought too negative impact on markets. We’ll see what’ going to happen over the next hours once the trading begins at BIST.
In Moody’s statement, there’s something about the external fragility, which means negative outlook on Turkish foreign trade deficit, current account deficit as well as Turkey’s foreign debt stock are strongly emphasized. But it makes me wonder, knowing that Moody’s has been monitoring Turkish economy for years, how come Moody’s can’t possibly realize this downward trend up until now?
When Turkey said, “Turkish exports hit record highs”, Moody surely knew that Turkey has been for a long time a country where imports was growing by fast pace, current account deficit was expanding despite oil price decline, and firms were borrowing dollar or euro loans because lire interest rates were too high. Turkey has always been like that.
Therefore, I think it’s very normal for me to look for a suspicious reason behind the fact that Moody’s outlook on Turkey was released right now, not before. As Lady Macbeth said, “What’s done cannot be undone”. I hope we will go through this shock just fine provided, of course, another rating agency doesn’t release a similar outlook.
“Too many noise to hear…”
While there’s a huge mess going on throughout the US about the American economic policies, Trump’s top economic adviser resigns. Last week, another top official at the White House has quit too. I think Government’s statements based on weak evidence mostly result in people with good qualification and competence resigning their posts.
Also, Trump’s “We will exclude Canada and Mexico from tariffs on steel and aluminium imports” statement shaped by harsh international reactions may have been another reason for recent resignations. Apparently, US President likes to make up a problem, put it on the international table and watch other countries dispute with each other over it. If he likes the taste of the tension, he immediately serves it to other countries, if not; he shifts into reverse and brings forward a new issue to make people forget the former.
Another cause of such absurd behaviours, that are probably not common even in the Middle East, is the fact that the “Age of Reason” is over. Today, those in power continue down their own road regardless the inconsistent nature of their behaviour; because voters too show the same inconsistency in their daily lives or when making important decisions.
People hitting the road early in the morning to get to work and back to home when the night falls have no time to thoroughly think about anything. They can’t develop a retentive memory under the bombardment of slogans and propaganda. No one gets surprised anymore to hear two contradictory statements made by the same person on the same subject, if there’s a reasonable amount of time between both statements.
Similarly, different words coming out of people’s mouths disappear amid the chaos of daily life.
- Inflation will fall
- Inflation must fall
- Inflation should better fall
Knowing that these statements listed above are generated by the same source, people immediately assume that inflation won’t fall, without thinking over it too much; because, if a confident tone of voice first sounds like a hope or a wish, then a prayer, it means that something is definitely not right.
No matter how strong statements are, we just can’t change the truth: High inflation, high unemployment and high interest rates cannot be controlled merely through supportive or morale-boosting statements.