There’s a clear distinction between Backgammon and Chess. Either of these games is good or bad. While one is a tactical game, the other is rather strategic. From diplomacy to economy, all actions that Turkey takes are dominantly based on backgammon: Tactical moves and bold statements.
Backgammon players try almost everything to destroy their opponents’ focus. Interestingly, this game involves all sorts of tricks that we use in our everyday lives, including trying to break the opponent’s morale by making condescending comments, underestimating the opponent, using bad luck as a pretext for failure, and getting more and more arrogant when you keep winning. The chess, however, involves any of these tricks. That’s why we, as Turkish people, are rather fond of backgammon.
As the week kicked off with obligatory regulations made to Foreign Currency Bank Deposits, I thought to myself, “I wish we loved chess more”. The situation we’re in now is very similar to a backgammon game where we become more arrogant when winning while we try to manage the situation through reaction-based maneuvers when losing.
We underestimated the rest while the economy was getting larger and stronger. We thought we were winning when exchange rates have remained stable from 2002 to 2013. We made condescending comments about our competitors when we were madly focused on erecting thousands of building as if we were putting the checkers on top of each other. Now, as the opponent is scoring points, we became losers waiting for luck to turn up. I wish we loved chess as much as we loved backgammon. I wish we could predict the possible outcomes of our actions, including F-35 Lightning II program and S-400 purchase from Russia, CBRT decisions and Incentives. I wish we could build and implement long-term and proactive strategies in lieu of making reactive decisions.
“From Reserves to GDP Growth…”
With the newly enacted regulation, it became more apparent that an additional amount of USD 4-4.5 billion will be added to CBRT reserves. This decision, which can be interpreted as “saving ammunition for hard times”, has very low impact on exchange rates.
Obviously, this decision will cause the cost of obligations to increase, deposit-wise. As required reserves keep increasing, the cost of deposits continues to increase as well, which consequently results in a rise in lending rates. I also think that banks will have difficulty lending loans based on their funds composition. I’m pretty sure that bank managers must be quite concerned about the recent drastic developments in TRY Deposit/Foreign Currency Deposit ratio.
As this recent decision by CBRT can also be interpreted as a decline in foreign currency liquidity in markets, in fact, it should have increased the exchange rates. But, the reason why exchange rates have recently declined is that CBRT reserves are getting stronger; because recently, we have started to consider foreign currency reserves as gross, net and “net after swap”. It was even discussed that net foreign currency reserves have become negative after the swap operation. The decision which was released yesterday may have helped people breathe a sigh of relief as it acted as an inducer to strengthen the reserves.
On the other hand, surveys on 1st quarter GDP growth data remained unpromising. Participated by 19 organizations, the survey revealed an expectation of -2.5 % for the 1st quarter growth. If this expectation becomes a reality, we will be facing two economic recessions one after another; which should not be called a “technical recession”.
Therefore, Ankara should pay utmost diligence when interpreting this data scheduled to be released before the Ramadan holiday. The data to be released soon should be taken seriously and spot-on predictions must be made for the upcoming quarters.