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Turkey heads for record current account surplus


Turkey may have notched up the largest monthly current account surpluses in its history in August and September, as a painful currency crisis appears to have led to a rapid rebalancing of the country’s economy.

The Turkish lira has plummeted 38.4 per cent against the dollar this year as foreign investors have been scared off by president Recep Tayyip Erdogan’s well-publicised opposition to the interest rate rises that most economists deem necessary to rein in an overheating economy.

Preliminary data released this week by the trade ministry suggested the goods trade deficit fell to $1.9bn in September, a 77 per cent decline from the same month last year. This follows similar year-on-year declines of 59 per cent in August and 33 per cent in July, as the first chart shows.

Importantly, though, for the health of Turkey’s economy, there are signs that the adjustment is not just happening because consumers and businesses are cutting back on imports due to rising prices.

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While imports fell 18 per cent year-on-year in September (and 23 per cent in August), exports jumped 23 per cent to a record September tally of $14.5bn, as depicted in the second chart. This took Turkey’s export-import coverage ratio to 88.4 per cent, from 59.1 per cent 12 months earlier.

“There has only been one month since 2012 when exports have been stronger than what the preliminary data are showing us,” said Charles Robertson, chief economist at Renaissance Capital, an investment bank. That was in July 2017, when exports rose 28 per cent. “It’s curious.” “The correction seems to be quicker and stronger than many expected,” said Nora Neuteboom, economist at ABN Amro. D

Data from the Turkish Exporters Assembly suggest September’s surge in exports was broad-based, with all major sectors participating. Automotive exports rose 21 per cent year-on-year to $2.6bn, agricultural produce 16.5 per cent to $1.9bn, apparel 13.8 per cent to $1.5bn and steel exports an impressive 95 per cent to $1.4bn.

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The figures are merely the latest to point to a rapid restructuring of the economy. Car sales plunged 67 per cent year-on-year to 17,595 units in September while the manufacturing purchasing managers’ index slid to a near-decade low of 42.7, consistent with a recession — even before a sweeping austerity programme kicks in to tackle a jump in consumer price inflation to 24.5 per cent and a surge in producer price inflation to 46.2 per cent.

Moreover, Mr Robertson estimated that Turkey would record a current account surplus of $2.1bn in each of August and September, far higher than for any month since his records began in 1992, as the final chart indicates, and the first surplus of any description since a tiny one in August-September 2015. These forecasts are based on factoring in Turkey’s traditional surplus in services, particularly noticeable in summer months when tourism is in full swing, and remittance flows, on top of the goods trade data.

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“The trade deficit is improving in the months where there is a lot of tourism and there has been more tourists this year than ever,” Mr Robertson said. While he does not expect that Turkey will continue to produce monthly current account surpluses as winter approaches, Mr Robertson said the rolling 12-month deficit, which peaked at $58bn in May, was likely to fall to about $6bn by July 2019.

A marked rebound in Turkish exports, if maintained, could have ramifications on the global stage. While a rise in exports in the wake of a sharp currency depreciation is entirely consistent with economic theory, it appears to be rather more elusive in practice.

Gita Gopinath, the new chief economist of the IMF, has argued that gains from flexible exchange rates “are less than you think”. In a 2015 paper, Ms Gopinath, then a Harvard University professor, wrote that “an exchange rate depreciation is perceived to make a country’s exports immediately cheaper on world markets. However, for the vast majority of countries whose exports are invoiced in a foreign currency [such as Turkey] this is unlikely to be the case.” As a result, in such countries a currency depreciation does little to increase the volume of exports but does increase the profits of exporters.

This contrasts with situation in the US, where 97 per cent of exports are invoiced in local currency. Ms Gopinath consequently concluded that: “trade balance adjustments, through relative price effects, are more likely to be driven by adjustments in exports in countries like the US, while being driven by adjustments in imports in countries like Turkey.”

The IMF itself concluded in the same year that weaker exchange rates have not lost their power to spur higher exports, citing research that found that a 10 per cent real effective depreciation of a currency raised real net exports (ie exports minus imports) by, on average, 1.5 per cent of GDP, with about half of this effect stemming from a rise in exports and half from a fall in imports.

Ms Gopinath’s conclusions do, though, support research by the World Bank, which found that currency devaluations are now only half as effective at boosting exports as they were in the mid-1990s. Her findings are also in line with analysis by the FT in 2015, focused purely on emerging markets, which found that during the two previous years currency weakness had not boosted exports at all, although it had led to a drop in imports.

As to whether or not Turkey has definitively bucked the trend will depend on further data. For now, Ms Neuteboom admitted to being “a bit puzzled” by the data, especially because Turkey has a large import component in its exports.

“Usually, countries that possess a lot of natural resources and are a net commodity exporter see these huge current account deficit corrections taking place, [but] Turkey is not a net commodity exporter,” she said. Ms Neuteboom did point out, though, that some of Turkey’s major export markets, such as Germany and the US, are growing strongly, which “should support a recovery, but perhaps not as swift as we are seeing now”.

One other factor behind September’s export surge could be that exports in August were weak, falling 6.5 per cent year-on-year to $12.4bn. Mr Robertson attributed this to a working-day effect, with four fewer working days this August than in August 2017 because of religious holidays. This could mean some of August’s activity was shifted to September, although even if that is so, average export growth over the past three months will still have been strong. “At the moment it’s looking like it’s going to be a really impressive recovery and mean that only one emerging market [in the MSCI equity index], Pakistan, has a current account deficit of 3 per cent [or more],” Mr Robertson added.

https://www.ft.com/content/e5924bc0-c71f-11e8-ba8f-ee390057b8c9
 

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https://www.haberturk.com/cumhurbaskani-erdogan-ak-parti-nin-kizilcahamam-kampinda-konusuyor-2170072

This is utterly wrong. Our retarded government cancelled agreement with McKinsey just because few leftist scum were barking about it. Who cares what leftist scums say? Nobody trusts government. There should be one independent foreign finance organisation, from US/UK/JAP/GER if possible, in the cycle for foreign investors to get some trust in the system.

But now our retarded government bows before the communist scums, which will scare investors more o_O
 
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https://www.haberturk.com/cumhurbaskani-erdogan-ak-parti-nin-kizilcahamam-kampinda-konusuyor-2170072

This is utterly wrong. Our retarded government cancelled agreement with McKinsey just because few leftist scum were barking about it. Who cares what leftist scums say? Nobody trusts government. There should be one independent foreign finance organisation, from US/UK/JAP/GER if possible, in the cycle for foreign investors to get some trust in the system.

But now our retarded government bows before the communist scums, which will scare investors more o_O

Leftists in Turkey are the biggest traitors.

They are anti nationalistic but they support kurdish nationalism

They are pro lbgt, they are anti militaristic they want a pacifistic population they want to cut military spending. They dream of a stupid utopia.

Even worse how they use Ataturk name. Ataturk was never a leftist he was a smart man who did not lean to stupid political spectrum called left or right.

Plus Ataturk was anti communist.
 
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AKP acts like pretty much leftist too, rather than capitalist;

> Huge minimum wage treshold
> State-funded healthcare (!)
> Supposed to be private sector led projects are being guaranteed by State budget
> Burning FOREX reserves to tank Lira ! AKP doesn't let market the decide the price of currency.
> Education is being funded by State !
> There are still hundreds of KİTs that should be privatized, but AKP doesn't care.
> Even Turkish Airlines belongs to State o_O

These things are not acceptable in Capitalist system. Why would one foreigner invest in such place? Atatürk's "Devletçilik" was not an idea to turn the economy into full blown State-Funding bs. It was a funding method for the sectors that Private industry does not exist. In current day, private industry is capable to handle every kind of sector, even Space industry.
 
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https://www.haberturk.com/cumhurbaskani-erdogan-ak-parti-nin-kizilcahamam-kampinda-konusuyor-2170072

This is utterly wrong. Our retarded government cancelled agreement with McKinsey just because few leftist scum were barking about it. Who cares what leftist scums say? Nobody trusts government. There should be one independent foreign finance organisation, from US/UK/JAP/GER if possible, in the cycle for foreign investors to get some trust in the system.

But now our retarded government bows before the communist scums, which will scare investors more o_O

They made one clever step recently but now they undo it? But as reading his remarks I am not sure that he meant cancellation but maybe changing terms of agreement. Maybe they will only monitor but nothing else. If it is the case, this would also be helpful.

I really don't understand "goygoy" of this country. Both oppositon and government supporters made big fuss about this McKinsey matter! They compared it with IMF or rating institutions like S&P or Fitch! This is full ignorance!

McKinsey is a consulting firm like Deloitte! And almost all ministries are worked/working with Deloitte for years without nobody noticed! They paid tens of million dollars as consulting fees to Deloitte! Nobody cried or talked about independence at that time! So why is this goygoy now???
 
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Consultancy and supervision are two different things.

McKinsey would supervise/inspect Turkish economy and give its reports on "what to do" to the government, as Damat Berat declared, which is pretty same with the operation of IMF, except for; IMF pays you while McKinsey is paid by you.

Even the pro-Akape environment had hard times to understand reasons behind this deal with an American firm, so RTE cancelled it.
 
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Well, using accounting firms like pwc, deloitte or E&Y just shows how little trust there is in "non" brand companies.

Just kidding. I've worked at PWC, and know that when customers pay for "your" services, they're paying for all the necessary knowhow that follows with the brand/company.

Doesn't change the fact that it's necessary to bid out these consultancy jobs every few years like every 4 years or so.

An example of how mental it is to keep using the same guys can be found in Denmark, they've used Law firm the "kammeradvokaten" for like 40-60 years or so, and the prices for every lawyer has skyrocketed. The hourly ratio is somewhere around 600-800 Euro, and that's not even a partner of the company.

So I believe the danish government decided to break this stupid trend and picked a different law firm who's prices were more competitive. Granted they need time to learn the ropes and procedures, but that's part of the game.

You need to expose certain things to competition regularly to keep everyone sharp.
 
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Leftists in Turkey are the biggest traitors.

They are anti nationalistic but they support kurdish nationalism

They are pro lbgt, they are anti militaristic they want a pacifistic population they want to cut military spending. They dream of a stupid utopia.

Even worse how they use Ataturk name. Ataturk was never a leftist he was a smart man who did not lean to stupid political spectrum called left or right.

Plus Ataturk was anti communist.
Oh my.. Guys please no one tell our friend that AKPians make up the vast majority of communists in our country, okay?

I dont think his heart can take that much. :(
 
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Oh my.. Guys please no one tell our friend that AKPians make up the vast majority of communists in our country, okay?

I dont think his heart can take that much. :(

I thought Akpians have always been right or centre right.
 
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I thought Akpians have always been right and centre right.
According to AKP haters on this forum first they where religious, they where shouting ”seküler devlet elden gidiyee”. Some years later they changed that Erdogan was an atheist. The interestin is that these days he have also became an hard core communist. :D

Haters gonna hate no matter what you do :-)
 
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