Predictions continue for Turkish economy
According to one leading Turkish businessman, signs of a slight recovery are evident in certain
manufacturing sectors. Rahmi Koç indicated positive movements in the whites sector (household products), commenting, that he hopes this will spread to other sectors. Koç, chairman of the Turkish industrial and financial group Koç Holding, is forecasting a possible economic recovery in the second half of 2002. Of course, most analysts agree with his view, but indicate it would be contingent on three factors:
Restructuring within Turkish government sectors
Developments in the Mideast
IMF reviews
The Turkish economy took a severe beating in 2001, contracting by 9.4% after the financial crises of November 2001 and February 2002. Experts explain these crises were due to severe problems in the banking sector as well as a massive public debt load. Koç told the media in April that in the current economic climate, there is no financial strength to make new
investments in
Turkey. Basically, he indicated that the resources to invest with, are simply not there. He added, that the economy must renew itself so it can expand and produce growth, in order to create the necessary resources. Meanwhile, the IMF's senior representative in
Turkey, Odd Per Brekk indicated he believes
Turkey can expect a 3% economic growth target in 2002 under the IMF program.
Turkey must fix problems to see growth
Certainly, no financial analyst could argue with that, but, there are a number of issues that
Turkey must grapple with before any growth is in sight, many experts report. The IMF decided in the latter half of April, to disburse the rest of its $1.1 billion loan to
Turkey under the $16 billion standby agreement. IMF desk chief for
Turkey, Juha Kahkonen told the media prior to that, that
Turkey still needed to take a few more steps in order for the IMF Board to make the loan available. After the IMF discussed the first review of the Turkish loan program on April 15, it was agreed that a further loan disbursement would be made, due to what was termed as
Turkey's ’rapid progress' towards implementing IMF steps.
Opposition on restructuring holding Turkey back
In March, there was still opposition by some in the government to restructuring moves. Experts agree that this type of climate needs to change before anything concrete takes place. Another issue is that the IMF prefers
Turkey not deviate from the guidelines and strategy it has laid out for the economic recovery program. While most analysts agree this is a logical move, there has been some opposition by the Turkish Chamber of Commerce and within Turkish business circles. Both maintain that a bit of deviation, taking into account
Turkey's unique position, would spur growth and encourage exports.
IMF senior representative, Brekk indicated he sees plenty of room for economic growth, considering sharp drops in private
consumption. Brekk added, that exports in 2002 are doing well and that recent financial reports have demonstrated an optimism in the market. Brekk made the remarks at a conference in
Turkey on IMF policies for Turkish recovery and cautioned that the government needs to resist what he termed -its tendencies to stray from basic IMF strategy.
Turkish business circles grumbling about IMF policy
Brekk's warning seems to have fallen on a few deaf ears in the Turkish business community as reports indicate that a number of business circles are putting pressure on the government to push growth. According to some market watchers and Turkish Chamber of Commerce (TOBB) members, it may mean deviating from the IMF program, if no solid turnaround is evident in the economy. The chairman of TOBB is urging the IMF to allow for the possibility of some deviation from the strategy. He claims this concept would not harm the IMF's fiscal rules. He also said it would not cause a transparency problem in the banking sector.
The reason for this proposal lies in the fact, that many in Turkish business circles feel there is no reason not to ’test the water' after such a long period of economic downturn. The argument is that certain conditions have to be met for the real sector to boost its
production and market its products. The obvious one is a healthy environment for financing. This is why the Turkish government has been working on what is known as ’The Istanbul Approach.' This system would enable bank lending to the real economy to resume by restructuring bad loans from the corporate sector.
Representatives from TOBB say they totally support disinflation objectives which would mean battling public sector financing gaps. IMF's Brekk echoed that sentiment, commenting that progress in economic policies recently has also come in at the same time as some positive developments in the economic sector have appeared. He added that consumer price inflation is at its lowest since the economic crisis began and was slightly above 1% in March.
Positive signs of recovery - caution in order
This all goes along with what financial experts and analysts were predicting for inflationary trends for the remainder of 2002, in their March forecasts. Brekk explained that he foresees positive signs in the continuing drop in inflation in
Turkey. This also assists in restoring credibility and efforts to curb inflation, he added.
At the same time, analysts agree some caution is in order. They say there are several significant factors to watch. The first is on the privatization front with the goverment's dismissal on April 10 of Uğur Bayar, head of the sell-off authority. Bayar, who ran the Privatization Administration for almost 5 years is rumored to have been let go due to breach of confidence in his duties. The dismissal could well have a boomerang effect, since sources report Bayar has been quite popular with foreign investors.
Market watchers and analysts say they feel it would be a loss for the investment community. Bayar had long been in favor of the Privitization Administration having the flexibility to make commercial decisions. Coincidentally, a new privitization law designed to transform the Privitization Administration into an autonomous entity has been waiting for approval since 2001. The second factor to watch, is the recent investigation initiated into actions taken by
Turkey's Minister of Education, Metin Bostancıoğlu for his banning of the Turban, traditional Islamic headwear in Turkish schools.