With the intention of reaching the 2014 objectives, while the Turkish economy is trying to do its homework, on the other hand, it is passing through various tests. Likewise, the second half of the semester includes both opportunities and threats, and the contexts and potential effects stemming from these will be discussed in my forthcoming column. However, before concentrating on the second period, it''s also important to take a look at how we left the first period behind.
The important part of the data related with the first period of the year has just been completed. As for the essential report, we will have it on September 10, when our second quarter growth score will be announced. Having said that, it is already possible to guess on how our score will be… When we gather the leading signals and other indicators together, we can draw the general outlook of the economy in the first period. To begin, let''s take a brief look at the first period report, which is gradually becoming clearer.
Foreign Trade has raised our Growth Score
While the Gross Domestic Product (GDP) had recorded a yearly 4.3% growth in the first quarter of 2014, the engine power had become foreign trade. When I evaluate the leading indicators related with the second quarter, I see that we are not steering away from this outlook As a matter of fact, in this period, while exports increased by 4.6% compared to the same period of last year and imports declined at the rate of 7.2%. As for this, it points out that the ''net export'' component, which is the difference of exports and imports, will have a strong effect on the second period''s growth, at least at the same rate it did in the first period. Even though we are not going into details, let''s note that there exists a positive ''gold'' effect on the imports and a negative one on the exports.
Domestic Demand has Failed to Gather Speed
On the other side of the GDP, there is domestic demand. As for people who are curious of whether the performance in foreign demand is also presented here in the second quarter, we need to give them the ''not really'' answer. Various data related with the industrial production, credit expansion and imports, signal that; in this period there is a low tempo in the private consumption, and the private investments, maintain the downward tendency and thus continue hindering our pace. Starting from this, if there won''t be any surprising effect in the public expenditures, the domestic demand will be contributing positively, but also limitedly, to the second quarter growth pace of the Turkish economy.
When we approach the domestic and foreign demand together, we can determine that we will be facing a figure around 4% in our first semester report''s growth section.
The Current Account Deficit has been recovering
As for the famous issue of our economy, "the current account deficit", it''s among the sections, in which our scores are going up on the semester report of interest. …. The deficit, has recorded a serious decline at a yearly 35% rate in the first half of the year. Nevertheless, let''s compute the change for the ones who say, ''Gold must have something to do with this'': Excluding gold, there is a remarkable 21% decline in the current deficit. Consequently, it seems that the economy has deserved an improvement in the current account deficit score, no matter if the gold is included or excluded. At this point, let''s not forget to give an A+ to exports because of its contributions. As for the finance side of the current account balance , let"s remind that the sensitive and volatile structure is still preserving its dominance.
Inflation has been fed with exchange rate and food prices
On the other hand, having stayed at the 9% band, inflation has been upsetting., foreign exchange rate, which has been increasing in the markets as a result of the shocks in the first few months of the year that are mixed up with FED messages and geopolitical developments, has become one of the factors that contributing to the inflation rate in the first half. Another factor that has put its mark on the 2014 inflation has been, without a doubt, food prices… Because of reasons like drought and frost, we have witnessed an unexpected climb in food prices. Accordingly, the second half is presenting a critical importance of inflation, which has failed to achieve the score desired in the first half.
Then what about the afterwards?
So we have summarized the factors that has become prominent in the first report of the Turkish economy in 2014. At this point, one of the first questions that come to mind is; is this performance satisfactory? Let''s not give the answer by only looking at the numbers in our report. Because, other countries in the class got their reports as well. Some of them got disappointed whereas the others are smiled . Thus, taking a glance on their scores is important in the sense of making a healthy evaluation in the present situation, where global integration is quite dominant….
The other question is, ''Towards which direction is this tempo expected to move in the second period?''… In this sense, it is apparent that foreign dynamics will be playing a critical role as much as domestic dynamics. As a matter of fact, while we are enjoying the balancing towards the foreign demand, the noises and changes rising from the other rows will somehow affect our performance in question.
How? Let us approach these in a totally new column on Friday.