At a recent signing event for my latest book “İktisattan Çıkış” (Exit from Economics), I’ve realized that I’m still signing the copies of my book using the last year’s date, which made everyone in the room, including me, burst into laugh. Apparently, I’m dwelling on the last year. But, there is no need to dwell on the past since the New Year will be nothing like the last one. Let me tell you why.
These days, I get a lot of questions about the most shocking or surprising events of 2019, or my expectations for 2020 and I try to answer them all in my own unique style. To tell you the truth, I fell somewhat satisfied to see the surprise on the faces of national and international press members when they hear some of my answers.
For instance, the most shocking event of 2019 was the international institutions’ miscalculated rating for Turkish economy. They thought the situation arisen from the FX crisis in 2018 and will be a permanent one. Turkey, on the other hand, was able to give a positive feedback to all the negative criticism by improving its exports, industry and tourism performance.
Also, having predicted that consumer prices will hit 15% at the end of the year supposedly due to the transitivity between inflation and FX rates as an excuse, international institutions were mistaken again. Similarly, the fact that Turkish industry, trade and other activities have started to show a better performance after the second half of the year killed all expectations predicting a 2.5% decline in Turkish economy.
Although we were lucky in some aspects, we have to admit that we worked hard: Calm trend in oil prices along with a positive export and tourism performance put Turkey in a good position where it could finally run a current surplus.
“What is the one event that has marked 2019?” My answer to that question would obviously involve Central Banks’ decisions: after a sharp rate cut, Fed said that it will leave rates unchanged in December 2019 and see what happens while CBRT delivered “preloaded” cuts based on predictions for a decline in Turkish inflation.
“A quick look at 2020…”
2020 will be harder and also easier than the previous year in some aspects. We might expect China and the US will adopt a softer policy to ease trade wars, which will be eventually terminated after the US Presidential Elections.
On the other hand, expectations involving that the US economy would enter a recession have all come to naught because all parameters show that a recession within the next year is not probable.
Similarly, this year will be harder than the last one for the CBRT as this year, inflation rates will be monitored closely on a monthly basis. Each and every critical decision will discussed and scrutinized for days. Everyone expects that policy interest rates will hit single digit but I believe that CBRT will opt for a more cautious policy.
Although I anticipate inflation rates will slightly exceed the government’s target, we’ll have to keep a closer track of the trend in unprocessed food prices. The fact that Iran-the US tensions have ended for now will prevent oil prices from exerting pressure on the general level of prices.
GDP growth in 2019 will turn out to be around zero thanks to great contributions from exporting activities. However, the details of the current growth models indicate that exports’ share in 2020 GDP growth will be decreased by 4-5%, mathematically, even if exports continue to show the same strong performance. An economic growth model based mostly on domestic demand and services cause the share of exports to diminish even in positive growth periods. But, this doesn’t mean a slowdown in exports; it is only technical detail of this type of growth model.
I also predict that world trade will relatively improve, but mostly on the basis of production volume, which will cause Turkey to keep struggling in terms of monetary volume, because of price competition.