Economic distress in Russia to have toll on Turkish economy

MUSTAFA SÖNMEZ – Hürriyet Daily News, Nov. 17. 2014

It is considered an indication of the new crisis in Russia that the devaluation of the Russian ruble against the American dollar reached 23 percent between Sept. 1 and Nov. 11.

ttThe dollar, which was 37.3 rubles on Sept. 1, gained value to reach 39.5 rubles by the end of the month. In October the dollar rose 10 percent more, hitting 46 rubles by Nov. 11. The dollar, which went up 23 percent in just 70 days, is driving the Russian economy into a corner.

Zero growth

In a statement the other week, the Russian Central Bank admitted that the Russian economy may face the reality of “zero growth” in 2015.

According to the Russian Central Bank, in the event that the sanctions against Russia continue and the average price of oil remains $95, then in the year 2015, the Russian economy will have zero growth.

Other scenarios are depicted as such: In the event that the average oil price stays above $84 in 2015, the Russian economy will shrink 0.7 percent. For the Russian economy to grow 0.5 percent in 2015, the average oil price must hit $105.

The outflow of capital has been influential in the meltdown of the ruble against the dollar. Both the foreign capital that had entered the country and Russian capital continue to escape. It is reported that net capital exit from Russia, which is going through instability because of the impact of economic and financial sanctions against it and the sharp drop in oil prices, has reached $128 billion in nine months.

The acceleration of the net capital outflow that totaled $61 billion over all of 2013 has caused the Russian currency ruble to devaluate rapidly. The decrease in oil prices also contributed to this process and the Russian Central Bank had to increase interest rates four times to curb the drop in the ruble. At the same time, the indicative interest rate has been increased from 5.5 to 9.5 percent. As a result of all these developments, the Russian economy has been halted in its tracks.



Russia, which entered a recession in 2009 because of the global crisis, is now facing the threat of a new recession as the fruit of the foreign policy of President Vladimir Putin, who is ruling the country in a one-man regime.

In the process that started with the annexation of Crimea and continued with military operations resulting in the de facto split of Ukraine, Putin’s support in Russia climbed but his vulgar display of power took the Russian economy to the point of standstill.

Russia had an economy which was based on oil and other energy resources to a great extent but it is a country that benefits from international capital movements to turn the wheels of its economy.

With harsh fluctuations in politics and with sanctions, foreign capital lost its appetite and departed. The Russian rich accompanied this escape. With the anti-American and anti-Western discourse he resorts to frequently recently, Putin is trying to maintain his popularity in Russia. What he will do now is a topic of curiosity and concern.

Impact on Turkey

The impact of Russia’s crisis on Turkey has started to decrease Turkey’s exports and hit its tourism. Moreover, in the eyes of the international investor, Russia and Turkey are in the same region and have similar geopolitical risks. They believe that, for this reason, distance should be kept. This has become a new rationalization for the loss of the appetite of the capital owner and it will affect Turkey negatively.

zzzRussia is a net exporter to Turkey; it earns a lot of foreign currency from Turkey, reaching $17 billion to $18 billion annually. Turkey needs to sell more goods to narrow this difference, but it looks as if the crisis will make this very difficult.

While exports to Russia between January and September 2013 were $5.1 billion, in the same period in 2014, they went back to $4.5 billion. This year, because of the excessive devaluation of the ruble against the dollar, it is impossible to reach the same level of last year’s total exports to Russia, which were worth $6.9 billion.

The economic shrinking will also negatively affect Russia’s tourism expenditures.

The highest number of tourists comes from Germany and Russia to Turkey. The numbers have been rapidly increasing in recent years. In the period between January and September 2012, around 3.3 million Russian tourists came to Turkey; this figure went up 4.1 million in the same period in 2014, nearing 14 percent of the total of 30 million incoming tourists.

Russia is a hopeful market for Turkey. The increase in the number of incoming tourists was 17 percent last year. This year even if this went down to 9 percent, the increasing trend is continuing. Turkey is likely to be affected negatively pretty much by the shrinkage of this market. However, it looks quite possible that Russia will cut down on its tourism expenditures because of the extreme valuation of the dollar – something that will negatively affect Turkey’s tourism.untitled

Another negative effect the Russian crisis will have on Turkey stems from the fact that they are in the same region.

The accelerated loss of reputation because of the geopolitical risks Russia has taken primarily affect capital inflow negatively, and rapid outflows have torn down the ruble. Turkey, in the eyes of foreign investors, is regarded as a country in the same region as Russia. And when the geopolitical risks Turkey has taken in the Middle East are taken into consideration, Turkey is perceived as a country with increasing risks in terms of capital investment.

This is an important factor that may cause a decrease in the capital inflow that Turkey desperately needs.


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Enerjide (eşe dosta) özelleştirme

Türkiye’de enerji sektöründeki özelleştirme uygulamasından kimler karşı çıktı? Enerji üretim ve dağıtım kuruluşları kimler arasında paylaşıldı? Havuz medyası enerji işinin neresinde? Devlet enerjiden çekilirken özel sektör istenen yatırımı yapıyor mu?

15 kasım 2014′te Ankara’da Türkiye Barolar Birliği’nce düzenlenen “Enerji ve Hukuk” konulu sempozyumda gerçekleştirilen sunum.

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Turkey’s exports unable to catch the dollar’s wave

Mustafa Sönmez – Hürriyet Daily News, November/10/2014

The U.S. dollar has been gaining value since May 2013 in all developing countries, including Turkey. The dollar, was 1.86 Turkish Liras between January and September 2013 before rising to an average of 2.16 liras, a 16 percent hike. It is normally expected that this would affect both exports and imports. It would have been expected that exporters in Turkey would have made use of this sharp hike in the dollar to increase exports. Likewise, the expensive dollar would be expected to deter imports. Well, what actually happened in the first nine months of the year?

We can see that the dollar did not quite facilitate exports, or not as much as expected, and that the increase was limited. The January-September 2013 exports figures only increased 5.5 percent in the same period in 2014 to become $118.5 billion. It could be said that despite the 16 percent increase in the dollar, the fact that exporters were only able to increase their exports by 5.5 percent is a result of the inertia of the exporter, its muscle relaxation and its bone loss.

The expensiveness of the dollar only decreased imports 4.2 percent. In the first nine months of 2013, imports were $187.5 billion, rolling back just $8 billion. This shows that Turkey’s dependence on imports is not a flexible one while also showing that the dependence of imports has largely solidified.

The result? Turkey’s foreign trade posted a $75 billion deficit in the first nine months of last year. This year, the deficit only decreased to $61 billion, in other words, increasing exports by 5.5 percent and restricting imports around 4 percent have only been able to shrink the deficit by $14 billion. This means narrowing the foreign trade deficit nearly 19 percent. However, because the contribution of tourism and other foreign currency-generating activities was not sufficient to finance the deficit, the foreign currency deficit neared $30 billion in the first eight months of the year.

According to the medium term program (OVP), exports will total $160 billion this year. Imports, on the other hand, will complete the year as $244 billion. This means a foreign trade deficit of $84 billion. This deficit could be lowered to $46 billion with tourism and other foreign currency-generating activities. The OVP expects $810 billion national income this year. If this estimate proves correct, then the planned current account deficit will correspond to 5.7 percent of national income. This figure was a very high one in 2013 at 7.9 percent. Even though it has been possible to create a 2.2-point drop in the current account deficit with a modest growth rate of 3 percent, it still looks as if it will continue to be the most important issue causing Turkey to be categorized as fragile.

Effect of gold

In light of the developments experienced especially in past years, while analyzing Turkey’s foreign trade it has become a must to include the “effect of gold” into the analysis. As a tool for paying, Turkey’s scrap gold exports and imports with Switzerland affect foreign trade data and equilibriums to a significant extent. This has especially been influential in the foreign trade balances in the period between 2011 and 2014.

Because Turkey was not able to pay for the natural gas it imported from Iran with foreign currency due to the embargo, this situation produced the formula of payment with gold. The gold trade with Switzerland, which was also an issue in the Dec. 17 and 25 graft investigations, has affected foreign trade figures. According to Turkish Statistical Institute (TÜİK) data, while Turkey imported gold worth $14.4 billion from Switzerland between 2011 and September 2014, it returned – that is, exported – $4.2 billion in gold, resulting in a foreign trade deficit of $10.2 billion.

In the first nine months of 2014, exports appear to have increased nearly $6 billion compared to the first nine months of 2013. One third of these exports come from reselling gold to Switzerland. When this happens, the increase in exports – when gold is excluded – falls two points to 3.6 percent. Again, in the first nine months of this year, what looks like a fall of $8 billion in imports is related to the decrease in the import of gold from Switzerland.

While gold worth $6 billion was imported from Switzerland in the first nine months of 2013, imports went down to $1.4 billion during the same period. Thus, gold imports decreased $4.5 billion. Consequently, what looks like a total decrease of $8 billion in Turkey’s imports is actually only $3.5 billion when gold is excluded, a decrease of just 1.6 percent.

Therefore, when the effect of gold is taken into account, it can be seen that the appreciation in foreign currency actually has produced much fewer exports, and that it did not decrease imports as expected. In terms of the Turkish economy and foreign trade, all of these are not considered as healthy signs.

Middle East in exports

What kind of a regional panorama do the exports present? Turkish exporters, who were not able to take advantage of the increase in foreign currency, were only able to near $119 billion. What is the situation for EU markets and did the Middle East markets grow?

The regional analysis of exports shows that Turkey’s exports even decreased, let alone increasing its exports to regions dominated by Muslim populations. From the regions in this category, exports to Near East and Middle East was $26.4 billion dollars in the first nine months of 2013; in the same period in 2014, there seems to be a decrease of over $400 million. Turkey’s exports to North Africa have also decreased nearly $300 million to $7.3 billion. Exports to other African and Asian countries have also decreased up to $300 million.

The decrease in exports to these regions is expected to continue in the coming months as well. It is estimated that the wars in the Middle East and the fall in oil prices will continue to affect negatively the exports to these regions.

Exports to Iraq, a country that has become Turkey’s second biggest market, fell $500 million in the first nine months to $8 billion; there have been drops also in exports to the United Arab Emirates and Saudi Arabia. Turkey, in this period, seems to have increased its exports to Israel by $300 million.

In North African markets, on the other hand, exports to Egypt have decreased $100 million, and in the Asian markets, exports to Iran  decreased almost $1 billion.

European markets

There was also an increase in exports to EU and non-EU countries in Europe in the January-September 2014 period. Exports to the 28 members of the EU increased 12 percent when compared to the first nine months of 2013, nearing $52 billion. It is meaningful that at a time when the EU is going through a recession, exports to this market increased 12 percent.

Exports to Germany, which is the biggest market for Turkish exporters, also increased $1.4 billion in nine months to reach $11.5 billion. This is important. Also, exports to the third biggest market, the United Kingdom, also increased $1.1 billion to $7.5 billion. This is also important. Exports to other markets, to Italy, for instance, look like they were limited to $400 million and to France $200 million. It is appropriate to remember the partnership of these two countries in the automotive production chain with their Fiat and Renault companies.

Exports to non-EU European countries generally increased 15 percent to $12 billion. But again, in this region, exports to Russia dropped $600 million. It can be said that Russia’s restriction of imports due to falling energy prices has had an impact in this, as well as the rapid devaluation of the ruble.

The increase in exports to Switzerland in the non-EU European zone is noteworthy. In 2013, these exports were not even $1 billion, but they exceeded $3 billion this year. There is an increase of approximately $2.3 billion in exports.

This increase is related to the scrap gold sent to Switzerland. At a time when the payment of the natural gas imported from Iran was done with gold and a figure such as Reza Zarrab emerged, gold imports from Switzerland went up to $6 billion in 2013. Then there was some kind of a return of this gold in 2014 when this payment style lost its popularity, although there was an increase in gold exports to Switzerland to the tune of $2.3 billion.


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Turkish households lose their appetite for spending on loans

Mustafa Sönmez    

November/03/2014, Hürriyet Daily News

Turkish families’ dependency on credit card spending has been slightly decreased compared to last year, according to official figures.

Turkish society was introduced to features such as using consumer credit from banks and loans through credit cards mostly after 2003, with the phenomena quickly becoming a fixture in our lives.

The Turkish economy rapidly borrowed externally as financial corporations sourced nearly one-third of their resources as credit for consumer families.

HDN This lending boosted the domestic sale of houses, vehicles and durable and indurable products, mainly white goods. To put it in another way, the borrowing by households became one of the building blocks of the growth paradigm based on the domestic market that went on to soar from year to year. From September 2004 to September 2014, the loan stock of total households increased nominally at a rate of 1,306 percent. However, a recalculation of this for inflation shows that there was an increase of 48 times in real terms. Those who borrowed one in 2004 are now borrowing five. The total credit used or the debt stock has increased almost five-fold.

However, in the past 12 months when the economy stagnated, there has also been a significant slowdown in consumer loans. The dimensions of the consumer loans that appear in the form of consumer credits as house, vehicle and general-purpose personal finances, and as cash credit through credit cards, exceeded 345.5 billion Turkish Liras (155 billion dollars) as of September 2014, but when inflation is taken into account, there was a 1 percent decline compared to the previous year. This means a decrease in demand for an economy that is growing based on the domestic market and also means a slowdown in its motor of growth.

According to Banking Regulation and Supervision Agency (BDDK) and the Undersecretary of Treasury data, the cumulative debt of households nominally increased 8.1 percent to 345.5 billion liras in the 12 months between September 2013 and September 2014. However, when the 8.9 percent consumer price index is taken into consideration, it can be seen that the debt stock of households in reality have fallen around one point. In other words, households have lost their appetite for borrowing in the past 12 months starting in September last year. They have not increased their debts; they have opted to reduce them.

HDN Vehicles first to be avoided

The type of bank loan consumer families avoided the most was automobile or vehicle credits. The demand for vehicle credits that constitute only around 2 to 3 percent of the total debt stock of households went down rapidly. In the past 12 months, vehicle credits decreased 17 percent. When inflation is taken into consideration, the decline is 24 percent.

Demand for vehicle credits not only declined in bank loans but also in loans that were offered by the finance agencies of auto sale firms. As a result, a significant drop was experienced in car sales. Turkey’s automobile and light commercial vehicles total market went down 19.2 percent to 473,000 vehicles in the January-September 2014 period compared to the same period last year. Car sales went down 19 percent to 367,000 in the same period year-on-year. The light commercial vehicle market also decreased 20 percent to 107,000 units in the first nine months of 2014 compared to the previous year.

Escape from the credit card

With interest rate hikes and administrative restrictions introduced, borrowing through credit cards also fell significantly. Credit cards debt stock, which was around 82 billion liras in September 2013, went down 10 percent in September 2014 to 74 billion liras. When inflation is taken into account, the decline is 17 percent. Those who borrowed through credit cards refrained from adding to their debt as a result of increasing interest rates. They also reduced their credit card debts by using personal finance credits which are consumer loans.

Thus, the drop in the burden on credit cards occurred also because people were covering them with personal finance loans which cost less because of lower interest rates.

Transferring high interest rate credit card debt into consumer loans naturally increased the debt stock of consumer credits. In household borrowings, personal finance credits, which correspond to the biggest slot at 44 percent, increased rapidly.

With this method, which means paying a debt with a debt, the debt stock of credit cards decreased 8 billion liras nominally in 12 months, while the stock of general purpose loans went up from 123 billion liras to 145 billion liras, an increase of 22 billion.

HDN Careful in mortgages

While they did not eschew borrowing for houses, consumer families acted much more carefully in comparison to previous years.

In the past 12 months, the mortgage stock went up from 106 billion liras to 120 billion liras, increasing 13 percent nominally, but when calculated with net inflation, one sees that the real increase is 4 percent.

Mortgages to buy houses went up especially in the third quarter of 2014, and as a result of this, mortgaged house sales when compared to the second quarter went up 28 percent. House sales, which went down rapidly in the first two quarters of the year, increased in the third quarter. As a result, the number of houses sold in the first nine months of the year exceeded 831,000 units. In the first nine months of 2013 though, 862,000 units were sold. The drop in sales for the first nine months stayed at 3.6 percent.

The decline in house sales has especially been seen in mortgaged house sales. With the increase of interest rates, the demand for mortgages decreased, pulling down mortgaged house sales. During the January-September 2013 period, while mortgaged sales neared 361,000 units, they fell to 275,000 units in the same period of 2014, recording an almost 24 percent decrease.


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One third of youth neither at work nor at school in Turkey

Mustafa Sönmez – Hürriyet Daily News, Oct.27 2014

As the world and Turkey proceed toward economic shrinkage, it is the young population who is the most anxious about it. While youth unemployment is rapidly increasing especially in the European Union, in Turkey the concerns of the young population are increasing regarding both access to education and access to employment.

European Statistics Office Eurostat data reveals that young employment in Europe, especially in Mediterranean countries, has reached jaw dropping levels. Turkish Statistical Institute (TÜİK) data also points out that young people in Turkey have significant problems in access to education and employment.

According to the July 2014 Household Workforce data, the young population in the 15-24 age group are 11.7 million and roughly a third of them are in education, another one third is working, while the final one third is either unemployed because they have not been able to find a job or they are neither at school nor holding a job. In other words, they are outside the workforce and this number has reached 3.7 million.

Inadequate schooling

Among the 11.7 million young people of ages 15-24 in Turkey who should mostly be in school, the ones who attend school are nearly 4 million, in other words they only make up one third of the young population. While the schooling rate in secondary education is 76 percent, the schooling rate in higher education is near 40 percent. This means they are out of school.

While the young population who are outside education reaches 8 million, those who are out in the market looking for jobs and who are the “workforce” are near 5.2 million as of July 2014. However, while only 4.2 million of them are employed, nearly 1 million of the youth workforce is unemployed. Consequently, according to the total of 5.2 million of the workforce, 18 people out of every 100, and according to the total youth population nearing 12 million, 8 people out of every 100 cannot find jobs, even though they are looking.

This 18 percent of youth unemployment varies regionally. Youth unemployment in the east and the southeast reaches 30 percent. But, in some western big cities it is also scary. For example, in İzmir, it is 27 percent, in Bursa and in the Kocaeli region it is 25 percent.

Men in employment

Among the 4.2 million youth who were able to find a job and who work, men make up two thirds of them, while women have a share of one third.

Young women between the ages of 15-24 are nearly 5.9 million and they lag behind both in education and in employment when compared to men. While 58 percent of young men participate in the workforce, the rate of participation in the workforce by young women is 29 percent.

While 32 percent of young males are students, this rate is 34 percent in women. Out of the total of young people in education, men constitute 49 percent and young women constitute 51 percent.

Among the young population in Turkey of the ages of 15 to 24, the rate of those who neither go to school, nor work is one third. Out of them, 8 percent of the population is “unemployed,” the ones who cannot find a job even though they are looking for one.

However, 23 percent of them neither go to school, nor are in the workforce market. This young population in transition is nearing 3.7 million and 2.5 million of them are young women, while 1.2 million are young men.

Out of the 2.2 million out of school-out of workforce, young women constitute 36 percent of the total population of young women. One reason creating this situation is the difficulty young people face in accessing secondary education in rural areas, especially in less developed regions; another factor is the behavior of conservative families of not sending young girls either to school or to work.

In big cities such as Istanbul and İzmir, while this trend is broken to a small extent due to the living conditions, in a large portion of Anatolia, especially in the cities, both education and jobs are shut down on young women by the patriarchal family order and the number of young girls who are neither in school, nor in jobs reach 2.2 million. If jobs were sought for them, when 350,000 young women who cannot find jobs even though they are looking for them are added, the number of unemployed becomes 2.5 million.

For young men, on the other hand, the number of those who are neither at work, nor at school reached 540,000, corresponding to the 9 percent of the young male population. When added to these, nearly 600,000 young men who cannot find jobs even though they are looking for them, then the inactive young male population becomes 1.2 million.

Youth unemployment in Europe

With the global crisis, youth unemployment in Europe has become one of the biggest problems. Starting in 2008, which is considered the first year of the crisis, youth unemployment increased rapidly. Those who joined employment from the 15-24 age group reduced rapidly, especially in the Mediterranean members of the EU; the youth are in a situation where they have not been able to find jobs for years. Turkey stands at a place near the average, both in terms of employment and in terms of youth employment.

According to European Statistical Office data, in the 28 member EU community, the participation of the young population in employment was 37 percent 2008; however, in 2012 it went down 5 percentage points to become 32 percent. The decline of points reached 6.2 in the Eurozone.

In general in the EU, youth unemployment went up from 16 percent to over 23 percent during the crisis time. The decline in employment and the increase in unemployment are not the same in the entire EU; in some of them, there are scary pictures, while others are relatively good.

While youth employment in North Europe has a higher course, in southern countries it is lower. The south has a dark picture also in youth unemployment.

Even though in the Netherlands 70 percent of the youth are employed and this rate went back 7 points in the crisis, their youth employment is still high at 62 percent. Youth unemployment is 11 percent.
In Germany, youth employment declined nearly 6 points and now only 47 percent of the young population is employed. Despite this, the unemployment rate is only 8 percent. The U.K. and Sweden are relatively in a better place in youth employment and unemployment. The real problem is in South, Central and East Europe…

France can only employ about 30 percent of its youth and youth unemployment is nearly 24 percent. They have a huge problem. As can be easily estimated, the ones that have the biggest problems in the youth department are the Mediterranean countries.

In Spain, youth employment, which was already 36 percent in 2008, went down to 17 percent. In Spain, youth unemployment reached a jaw-dropping 55 percent. The same goes for Italy. Youth unemployment in Italy skyrocketed during the crisis from 21 percent to 40 percent. Similarly, Greece and Portugal are in trouble with youth unemployment. In Greece, 58 percent of the youth is unemployed and only 12 percent of the young population have jobs.

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Crisis cost 5 million jobs in Europe as Turkey boosted employment

MUSTAFA SÖNMEZ – Hürriyet Daily News,October/20/2014

The global crisis is behind us, almost six years on. Even though the epicenter was the United States, the European Union also caught fire immediately during the crisis. The U.S. is attempting to stand on its feet after the half-dozen years that have passed, but it is not easy to say the same thing yet for the EU.
For the 28-member EU, various countries were affected to varying degrees. Some members were heavily wounded, such as Spain and Italy. Germany, on the other hand, which is considered the leader of the union, is in a relatively good situation, and one could even say it grew stronger during the crisis. The United Kingdom is trying to recover with difficulty. However, the big picture tells us that the EU is going through recession and the light at the end of the tunnel has yet to appear.
Loss of jobs

The biggest pain of the crisis was felt by those who lost their jobs. The easiest way to measure the damage of the crisis from country to country is to review the employment losses of countries.

According to the European Statistics Office Eurostat’s data, the EU’s growth rate before the crisis, in 2007, was 3.2 percent. It was rolled back to 0.4 percent first in 2008 when the crisis erupted, but hit the bottom in 2009 when it experienced the biggest shrinkage in its history, dropping 4.5 percent.

Following this shrinkage, in 2010 and in 2011, some relative recoveries were experienced. However, in 2012 the union again experienced a negative growth rate of 0.2 percent. In 2013, a recovery of 0.1 percent was recorded from there. The expectations for 2014 were not pleasant either.

While six years have passed since the global crisis, economic troubles varied from one country to the other. Mediterranean countries, which had difficulty in harmonizing with the transfer to the joint currency, the euro, after 2000, were hit the most by the crisis. Greece experienced the heaviest blow while Spain, Portugal and Italy also received heavy blows. While Germany suffered minor scars because of its export capacity and its current account surplus, the U.K. was fiercely shaken by the crisis but is trying to recover rapidly.
In Europe, the most direct impact of the crisis is on employment. Before the crisis reached its peak, in the last quarter of 2008, the total number of employed in the EU was 219 million. In the second quarter of 2014, however, this number dropped to 214 million, meaning that roughly 5 million people lost their jobs in the global crisis.

No doubt, some of the 28 members experienced major losses in employment; some, though, were able to increase their employment rates. The total losses in the losing countries amounted to 8.9 million, while the winners created around 3.9 million jobs, giving a balance of around 5 million fewer jobs.

The losers

Spain led those that lost the most. Its economy has shrunk four times in five years since 2009; while it had 20.5 million employed at the end of 2008, this figure dropped to 17.2 million at the second quarter of 2014; the loss is an unbelievable 3.2 million. In other words, 3.2 million people lost their jobs in Spain.

When the global crisis came, 4.5 million people were working in Greece. Almost 30 in 100 people lost their jobs in the crisis, and employment went down 1 million to 3.5 million.

In Italy where the crisis also hit heavily, the loss in total employment – which was 23 million – fell 1.2 million. Portugal, meanwhile, suffered 560,000 job losses during the crisis.

While Romania, the Netherlands and Bulgaria constitute the other major countries that experienced losses in employment, Iceland, southern Cyprus, Croatia, Estonia and Slovakia were countries that survived the crisis with small scars.

The winners

The 11 European countries which increased their employment rather than experiencing losses created 3.9 million jobs, ultimately giving employment to around 110 million.

Germany led this group while distinguishing itself markedly from other countries. This country, after going through a deep shrinkage in 2009 amounting to 5 percent, started hovering at growth rates of 4 and 3 percent in subsequent years. Its growth in the following years followed a horizontal course.
In Germany, the number employed in the last quarter of 2008 was 37.5 million. This figure was 39.6 million in mid-2014. This means an increase of nearly 2.1 million in employment during the crisis years.

Following Germany, it was the U.K. that increased its employment with 734,000 jobs. Also Hungary, Switzerland, Belgium, Austria and Sweden were able to increase their employment rates.

And Turkey

In contrast with the countries in Europe which lost a net 5 million jobs during the global crisis years, EU candidate country Turkey presented a very different profile in terms of employment. During the period in question, Turkey increased its agricultural employment by 1.2 million and its non-agricultural employment by 3.4 million. Even though its non-agricultural employment decreased during the 2009 crisis, it rapidly increased in the subsequent two years. With annual growth of approximately 9 percent in 2010 and 2011, the number of non-agricultural employed neared 18 million.

Despite the growth rate of 2 percent in 2012 and 4 percent in 2013, it was interesting that the rapid increase of employment continued. As of mid-2014, total employment has reached 26.5 million. While almost 6 million of these jobs are in the agricultural sector, 20.5 million are non-agricultural.
jjNonetheless, Turkey’s seasonally adjusted unemployment rate in July 2014 was 10.4 percent; its non-agricultural unemployment rate is 12.5 percent, meaning its unemployment figure has exceeded 3 million.

Also, the quality of the employment that seems to have been created in Turkey should be taken into consideration. Even though numerous non-agricultural jobs seem to have been created, their low-paying and low-skilled nature are conspicuous. Labor-intensive industries such as textile and food, as well as construction, tourism and urban services are the main employment fields. An employment profile with low added-value and low productivity constitute the other side of the coin.



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Turkey ranks first in the inequality of income distribution

Mustafa Sönmez – Hürriyet Daily News October/13/2014

Economic growth during the Justice and Development Party (AKP) era was based on the inflow of foreign resources, concentrating on the domestic market. This has caused a quantitative increase in non-agricultural wage earners and also a growth in the inflow of salary/wage into households in the absolute sense.

However, the surplus created by this growth, at the same time, accelerated the seizure of the profit/interest rate/excessive income by the top segments of the pyramid. Moreover, there were significant increases compared to the previous period in the outflow of the surplus, which corresponded to the yearly $40 billion of foreign investments.

How, in this framework, was the share of this economic pie that grew about 5 percent annually? Has there been a recovery in the distribution in Turkey’s capitalism in this new climate? Has the inequality in the distribution of income lessened between the ones who are at the top of the population pyramid and the ones at the bottom?

TÜİK and income distribution

According to the income distribution surveys carried out yearly by the Turkish Statistical Institute (TÜİK), after the 2001 crisis the individual income distribution in Turkey moved to a more equal position.

As TÜİK’s income distribution data claims, in the years following the 2001 crisis, while the share from the total income of the first four groups of 20 percent starting from the very poor increased, the share of the richest 20 percent showed a constant decline. According to the same source, while the share of the first 20 percent who received the least share from total income was 5.3 percent in 2002, this figure went up to 6.6 percent in 2013. The share of the fifth group who received the biggest share from total income was 50 percent in 2002, while this went back to 45.2 percent in 2013. In parallel with this, the Gini coefficient, which shows the inequality in income distribution, was 0.44 in 2002 and went back to 0.38 in 2013.

What kind of a radical change was in question that decreased the incomes of the very top minority and increased the incomes of the families at the very bottom from the 1994 crisis to the 2001 crisis and from there to 2013? Several economists are asking this question and they express that it is a method issue in the income distribution survey repeated every year.

The method issue is this: In income distribution surveys, data is collected upon declaration. In other words, the selected households in the sample are visited and their incomes are asked and whatever they declare, that is accepted as correct. The “pie” that comes out is presented to the public as the distribution portrait and how it is distributed in 20 percent, 10 percent and 5 percent groups of the population.

Those who are criticizing this method are saying that collecting income data through declaration to estimate the pie is misleading unless it is cross tested with other data.

It is possible to see the unhealthiness of the data collected on the basis of declaration in the income distribution survey by comparing them with special consumption expenses.

The results of the TÜİK income distribution survey reveal that in 2013, there were 20,635,000 households in Turkey and the average of each household’s annual income was 29,000 Turkish Liras. In this case, the total pie that has been shared has a size of 608 billion liras. However, the same TÜİK’s 2013 national income data say that households have in the same year spent 1,109 billion liras. In other words, if only the amount of spending is taken into consideration, it can be seen that the pie that looks as if being shared is 54 percent bigger. This particularly shows us that there are shortcomings in especially determining the incomes of profit, interest rate and rent in the pie. As a matter of fact, data that only considers a pie that is only 56 percent of the spending is far from a reliable one. Moreover, it has been this way for years and TÜİK does not have any effort to add the non-recorded declarations into the analysis to fill in its deficiency.

International rankings

While TÜİK’s “Income Distribution Statistics” that it has been conducting every year since 2003 with the same method and the outcome of which it releases presents very questionable results scientifically; again, from 2003 onward, there is an effort to pull down the Gini coefficient. In this period that coincides with the AKP regime, the Gini coefficient has been decreased from 0.42 to 0.38, creating an impression that distribution has entered a recovery process in this era. The income distribution inequality in Turkey has been sent to institutions, such as the OECD, World Bank and the EU with these produced Gini coefficients.

Despite all these, even if the latest Gini coefficient announced by TÜİK is accepted as truth, again, Turkey cannot escape being the country with the worst income distribution in Europe.

According to the European Statistics Office Eurostat, Turkey, even with its 0.38 Gini coefficient, is 8 points higher than the EU average of 0.30 Gini coefficients. Even the country closest to Turkey, Spain is three points behind Turkey. While Mediterranean countries such as Italy, Spain, Greece and Portugal are nearing Turkey in inequality, it can be seen that in North European countries the distribution is relatively fair. In these countries where the social state tradition prevails, the Gini coefficient is below 0.30. Distribution in Europe’s biggest, Germany, though, is more equal compared to other big countries, such as France and the United Kingdom.

In the world

The Gini coefficient of Turkey, which is presented as 0.38, does not take Turkey off of the list of the world’s worst income inequality countries.
The World Bank and OECD data reveals that South Africa is by far the champion of income inequality. Even though the white minority was ousted from political power in 1994, the white minority continues to be the richest segment in the country, while the gap between the South Africans, most of who live in shanty towns, does not narrow.

While the Gini coefficient expresses absolute inequality with 1, South Africa is the closest country to 1 with its 0.63 coefficient.

While Brazil takes the second place with its 0.55 Gini coefficient, the gap in other South American countries Chile and Mexico is also remarkable.

Turkey, with its “revised” 0.38 injustice coefficient for 2012 comes after China and Russia, which experience major inequalities in their transformation into capitalism. Malaysia and India in Asia and Spain in Europe are the closest countries to Turkey in inequality.

Accurate data  

In the light of all these facts, distribution continues to be an important issue for Turkey, but it is vague and behind a cloud about which direction in fact it is heading. Unfortunately, it is not easy to make a scientific evaluation because of the lack of production of accurate data. The findings of the survey carried out every year by TÜİK on income distribution contradicts with several realities; they are either insufficient or weak; and they fail to facilitate our comprehension of real distribution relations and their change from year to year.

The “Gross Domestic Product according to Income” issued by TÜİK every year was providing more accurate information on the distribution of the salary and non-salary surplus of the national income; however, as of 2006, this data production was ended without the need to make an explanation why.

The way to obtain accurate data on such topics as income distribution, which has political consequences as well as economic, is indeed through public institutions again. A healthier approach needs to be adopted in data gathering and methodology for an objective, scientific information production.


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Lira leads the way in emerging-currency devaluation

MUSTAFA SÖNMEZ – October 5, 2014, Hürriyet D.N.

The United States’ Federal Reserve (FED) will cut its bond-buying program as part of plans to end a program that served to support its country’s economy since the global crisis and will slowly increase interest rates.

Following this message from the FED, the capital outflow from “emerging countries” has caused significant losses in local currencies in the past 16 months.hh

The Turkish Lira leads in this process. The dollar which was 1.82 liras in May 2013 went up to 2.28 liras on Sept. 30, 2014. Thus the lira lost 26 percent against the dollar. In the period in question, the month that the lira lost the most was January 2014, and when the lira lost nearly 7.5 percent against the dollar, the Central Bank opted for shock increases in interest rates.

September 2014, on the other hand, has been the second month after January that the lira lost the most. A dollar, which started the first working day of September at 2.16 liras closed the month at 2.28 liras. This performance, which means a monthly loss of 6 percent, means Turkey lost the second most among emerging countries or developing countries in September.

According to the IMF database, the emerging country whose currency was devalued the most in September was Brazil. The Brazilian Real lost 9.6 percent of its value against the dollar in September.

Hot on the heels of Brazil and Turkey, which occupied the top slots in devaluation against the dollar in September, the South African Rand and the  Russian Ruble lost 5.6 percent and 5.5 percent over the month, respectively. The currency that lost the least among emerging countries in September was the Indian Rupee at 1.7 percent. The Czech, Polish and Hungarian currencies lost between 1.8 percent and 3.2 percent while it was quite remarkable that the Mexican Peso lost only 2.3 percent this September.

Most fragile in 16 months

The Turkish Lira, with its 4.6 percent loss of value in September, has devalued the most in terms of emerging countries since May 2013. Its devaluation in 16 months has reached 26 percent. A similar erosion has been observed in Russia’s national currency, as the country has been hurt by an embargo. pp

The 16-month devaluation of the ruble has reached 23.8 percent, with the erosion in the currencies of Indonesia and South Africa following it. The real’s erosion over the past 16 months was 19.5 percent. The least devaluation during that period was seen in European emerging countries. The devaluation in the Polish, Hungarian and Czech currencies in this 16-month period stayed in the corridor between 2.5 and 8.4 percent.

The adventure of the lira

While the lira was in the 1.80 TL/$ corridor in mid-2013, there was a nearly 4 percent loss in June, taking it up into the 1.90 lira corridor. The lira could not recover in the following months, even hitting 2.00 liras in August. Capital outflow occurred from the country, the political risk of which rose with the graft operation of Dec. 17 and Dec. 25, 2013, while new inflow also dropped. Therefore, at the end of 2013, the value of the lira against the dollar jumped into the 2.10 corridor. uu

With the political risk added to the economic risk, the dollar hit 2.20 liras on Jan. 16, 2014, and went up to 2.35 on Jan. 28, showing signs of a further upward trend. On that date, in a belated action according to several experts, the Central Bank intervened with interest rates and increased the weekly repo interest rate from 4.5 to 10 percent – in other words, with a shock increase of 5.5 points, intervening in the devaluation.

Following this severe intervention with interest rates and following the local elections on March 30, the political risk perception decreased, and the dollar went down to 2.07 in mid-May. However, there were presidential elections on the agenda and the hot clashes in the region were deepening. With the effect of the Islamic State of Iraq and the Levant’s (ISIL) attack in Iraq, Turkey’s geopolitical risk increased. With this perception, the price of the dollar in the following months went up from the 2.10 lira corridor to 2.20 liras, completing its climb to 2.28 liras by the end of September.

In the face of the devaluation of the lira, the Central Bank, despite all the pressure, did not reduce interest rates openly. However, it increased the number of dollars it sold to the market from 10 million to 40 million in the last week of September. It also restricted the liquidity amount it was supplying to the market to 8.25 percent and allowed the overnight rates to go up to 10.9 percent on Friday. In other words, it increased interest rates not in an official way, but via an indirect path.

Short-term loans

The dollar exchange rate is expected to more negatively affect firms that have short-term loans and banks. Even though the bank valued that short-term loans at the end of July at $130.2 billion, the total amount of loans to be returned within 12 months exceed $167 billion. Out of the short-term $167.1 billion loans stock, the portion of $23.4 billion belongs to the loans of local branches of banks, while those of private sector companies belong their overseas branches and subsidiaries.

The public sector has a share of 15 percent in the total loan stock, the bank 1.2 percent and the private sector 83.8 percent.

The biggest portion of the loans that are due within the next 12 months belong to private banks at $85 billion. However, public banks such as Ziraat and Halk also have almost $20 billion in short-term loans.

Firms, namely the real sector, have nearly $49 billion of loans squeezed into 12 months and a significant amount of them are import loans. Apart from public banks, the Treasury has liabilities associated with Eurobonds at nearly $8 billion, also within the next 12 months.

External debts constitute an important vulnerability. There is a concern that the dollar exchange rate which will probably jump to 2.30 liras threshold soon will result in serious fractures both in banking and in the real sector. In this case, the suggestion is that those firms that have major exchange rate expenses in their 2013 balances will become more fragile and start queueing up to be saved and that the bad debts of banks will increase.


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Stagnating house sales in Turkey prompt slowdown in construction

Mustafa Sönmez – Hürriyet Daily News /September 29, 2014

The slowing of the tempo in housing, the locomotive sector of the ruling Justice and Development Party (AKP) era, and generally in construction investments has become quite apparent. In the construction investments, with predominantly residential constructions, 35 percent of which are done by the government (central government and municipalities), two thirds of which was done by the private sector, the growth in the first half of 2014 remained behind the prior four quarters and fell to 3 percent.
In 2012, the annual growth stayed at 2.1 percent and the increase in construction investments remained below 1 percent; they speeded up in 2013 and investments increased nearly 9 percent. In all the four quarters of 2013 the tempo kept at a high level and the average investment increase reached 9 percent.

In 2014 though, this pace could not be maintained and the growth, which was nearly 6 percent in construction investments in the first quarter of the year, has gone down to 3.1 percent in the second quarter.

While the annual growth was 5 percent as an arithmetic average in the period between 2003 and 2013, the growth in construction reached an average of an annual 6.5 percent. Despite their share in total national income becoming 7 percent, construction investments have also directed the route of industry. Construction, which has activated several sub-branches of the manufacturing industry, from cement, to iron, to glass, ceramics, bricks and wood, has also changed this industry as to address the domestic market.

In these years, construction was also effective in also determining the course of finance. External bank loans were especially positioned as domestic consumer loans, with a share of nearly 25-30 percent. Mortgages hold the most important place among consumer loans. As of the end of September 2014, among the consumer loans stock, which had reached 270 billion Turkish Liras, loans for housing constitute 44 percent of it.

Also in employment…

The bottleneck in housing, and following it, the slowing down observed in the construction sector have also caused a decline in the number of people the sector employs. According to the data of the Turkish Statistical Institute (TÜİK) Household Work Force Survey, seasonally adjusted construction employment could not maintain its level of 2,018,000 people, reached   the first quarter of the year, and dropped to 1,854,000 people, with a decrease of 164,000 in the second quarter.

Why has it slowed down?

The slowdown in the pace in construction investments, which have become quite clear, is observed to come from predominantly housing investments, from the slowdown of the sale of housing units produced.

In mid-2013, the change in the global monetary climate that stemmed from the signals of the FED about its amendment of monetary policies diverted foreign investors to U.S. bonds. The exit of foreign capital from countries like Turkey increased and appetite for re-entries fell. When the political risk in Turkey was added to this, the exit of foreigners increased and the foreign exchange rate hiked in value by around 22 percent. This has caused an increase in costs in housing, as it did in all kinds of goods.

More importantly, an increase in interest rates was experienced. In order to curb the increasing foreign exchange rate, in January 2014, interest rates were raised radically by 5.5 points to 10.5 percent, causing a chilling effect on the economy. The interest rates of mortgages, which constitute almost half of consumer loans, were also affected by the new climate causing a deep effect in the housing sector. The demand for mortgages went down considerably; a sharp fall was experienced in mortgaged home sales. TÜİK’s housing sales statistics show that mortgaged home sales, in other words, sales of housing units bought with bank loans have fallen sharply. As a result of this, housing stocks have increased; thus followed by a decrease in housing investments.

According to the latest data, there was a 20 percent decrease in housing sales in July 2014, when compared to the same month one year before. In July, only 85,000 units were sold. The sale of mortgaged houses went back 33 percent, when compared to the same moth of the previous year.
The period between January 2014 and July 2014, in other words, the first seven-month period, gives a clearer picture. In this period, housing sales decreased 66,000 to drop to nearly 610,000 compared to the total of seven months from the same period the previous year. This corresponds to a decrease of 10 percent. But the real drop was experienced in the sales of mortgaged houses. In the first seven months of 2013, mortgaged houses, the ones bought with bank loans, were 291,000, whereas this figure fell to 197,000 in the first seven months of 2014. This means a decline of more than 32 percent and constitutes the main reason why construction investments have slowed.

The most important reason the sales of mortgaged homes declined is the increasing interest rates, as well as the increasing foreign exchange rates, which both negatively affect the costs of houses, causing the low course in the demand.

Because of the high inflation rate, interest rates will not decrease in the coming months, thus the demand for housing loans will not pick up, and it looks probable that the slowdown in the sector will also continue in the coming quarters.


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TÜİK’ten gelir uçurumuna yine makyaj…

BirGün’e verilen demeç; 23 Eylül, Salı

  • İktisatçı Mustafa Sönmez;  “TÜİK  sağlıksız gelir dağılımı araştırması ile 2013’te de bölüşümü iyileşmiş gösteriyor, 2006’dan bu yana bunu tekrarlıyor ve hem iç hem dış kamuoyunu yanıltıyor”…
  • Sönmez, paylaşılan gelir pastası, milli gelirde harcanmış görünenin ancak yüzde 54’ü, varlıklı sınıflar anket sırasında gelirlerini sakladıkları için, pasta da, paylaşım biçimi de adaletsizliği yansıtmıyor.
  • TÜİK’e bakılırsa, en varlıklı sınıfın gelirlerinin yüzde 52’si maaş ve ücretlerden, yüzde 15’i emekli gelirlerinden oluşuyor. İşveren gelirleri ise yüzde 15’ten ibaret

Kısa adı TÜİK olan Türkiye İstatistik Kurumu, 2013 Gelir ve Yaşam Koşulları isimli araştırmasını yayınladı. Araştırmada 2012’den 2013’e gelir dağılımının iyileştiği ve eşitsizliği gösteren Gini katsayısının 0,402’den 0,400’e düştüğü öne sürüldü. TÜİK’e göre,  maaş-ücret gelirleri yüzde 48,3’lük oranla toplam gelir içerisinde en fazla paya sahip olurken girişimci kârları yüzde 15 dolayında pay aldı. .


İktisatçı Mustafa Sönmez, TÜİK’in gelir dağılımı, yoksulluk  araştırması adı altında her yıl tekrarlayıp bulgularını duyurduğu bu çalışmanın yöntem olarak büyük eksikler içerdiğini, dolayısıyla iç ve dış kamuoyunu büyük ölçüde yanılttığını belirtti. Sönmez, BirGün’e yaptığı değerlendirmede şöyle konuştu; “ TÜİK, her yıl aynı yöntemle bu anketi uyguluyor ve her ne hikmetse toplumda gelir eşitsizliği hep iyileşiyor ve Türkiye, dünyadaki en utanç verici bölüşüm ilişkilerine sahip ülkeleri arasından bu sayede çıkarılmaya çalışılıyor.”

Sönmez, yöntemle ilgili eleştirilerini ve ortaya çıkanları şöyle ifade etti;

“Bu anket, hanelere gidip gelir beyanları alınarak yapılır. Alt ve orta gelirliler saklayacakları bir gelirleri olmadığı için doğruya yakın beyanlarda bulunurken varlıklıların ne kadar isabetli seçildiği ve beyanlarının ne kadar doğru olduğu su götürür.

Nitekim, anket, 2013’te Türkiye’de 20 milyon 635 bin aile olduğunu ve bunların uuortalama yıllık gelirlerinin 29 bin TL olduğunu ifade ediyor. Bu durumda paylaşılan toplam pasta, 608 milyar TL’lik bir pasta. Gelin görün ki, aynı TÜİK’in 2013 milli gelir verileri ailelerin aynı yıl 1 trilyon 109 milyar TL harcama yaptıklarını söylüyor. Yani sadece harcananları ciddiye alsak, paylaşılmış görünen pastadan yüzde 54 daha büyük. Bu da özellikle kâr,faiz,rant gelirlerinin , bölüşüme konu pasta tesbitinde eksik kaldığını bize gösteriyor. Gerçekte, harcananın ancak yüzde  56’sından ibaret pastayı nasıl ciddiye alacağız ? Üstelik bu yıllardır böyle ve eksiği gidermek için kaçak beyanları analize katacak bir çaba yok.”


Sönmez, bu yöntemsel çarpıklık nedeniyle ortaya komik manzaralar çıktığını da ifade etti ve şöyle örnekler verdi; “ TÜİK’i ciddiye alacaksak, memurlar ve işçilerin gelirleri, toplam pastanın yüzde 48’ini aşıyor, emekli maaşları pastanın 18’ini oluşturuyor. İşverenler,patronların kârları ise yüzde 13’ten ibaret, çiftçiler yüzde 6 pay alırken gayrimenkul ve borsa rantiyeleri de yüzde 6 paccya talim ediyorlar”

“Bir başka karikatürlere konu olacak TÜİK bulgusu da şu”  diyen Sönmez, şöyle devam etti. “TÜİK’in en varlıklı yüzde 20’lik kesim olarak tanımladıklarının gelirlerine göz attığınızda bunların yine yüzde 52’sinin maaş-ücret gelirleri, yüzde 15’inin emekli maaşları olduğunu görüyorsunuz. Patron kârları yüzde 17’nin altında kalıyor, rantiye gelirleri ise yüzde 8,5’tan ibaret. Yani TÜİK’e göre memleketin en zenginleri yine iyi ücret –maaş alan çalızzşanlar ve şanslı emekliler”…

Bu anketin ciddiye alınmaması ve daha sağlıklı yapılması için muhalefet partilerine görev düştüğünü belirten Sönmez, “Halkın vergileriyle böyle saçmalıkların her yıl tekrarlanması, yoksulluk verilerini de güvenilmez yapıyor ve sadece rejime propaganda işlevi görüyor ” dedi.




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