Differences and similarities between the economies of Brazil and Turkey

Mustafa Sönmez – Hürriyet Daily News, May/02/2016

Despite the differences that have emerged in the past two years, Brazil and Turkey are two countries that are economically comparable. Recently, efforts have intensified to predict the trends in Turkey by observing what is happening in Brazil.
Brazil is the seventh country in the world in terms of national income, which actually corresponds to three Turkeys. It has a population of 190 million. In 2012, its growth was 1.8 percent and in 2013, it was 2.7 percent; however, in 2014 its growth fell to 0.1 percent. In 2015, it plummeted and shrank 3.8 percent. A drop with a similar tempo is expected for 2016.

The country risk premiums, or Credit Default Swaps (CDS), are particularly for guiding investors. When CDSs are taken into consideration, it can be seen that during the 2005-2014 period, there was not a big difference between Brazil and Turkey. However, as of 2015, both economic circumstances and the political climate in Brazil worsened, constituting a major variance from Turkey. At the end of 2015, Brazil, with its 446 risk premium left being behind Russia and peaked among emerging countries. At the same date, Turkey’s risk premium was 274. At the end of April 2016, Brazil was still at the top with 361 while Turkey had 251. The difference is clear.

The 14 years of AKP and PT

It is possible to say that during the governance of the Justice and Development Party (AKP) in Turkey and the Labor Party (PT) in Brazil that have exceeded 13 years, world conjuncture and international trends have played major roles. The AKP started its governance venture with the November 2002 elections by taking over a Turkey that had gone  through the 2001 crisis and after tasting the bitter pill of the IMF, it was about to recover.

The PT came to power with the 2003 elections. The PT was one of the biggest parties of the rising left populist wave in Latin America in the 1980s. It had large working class grassroots, union support, a socialist wing and a former labor leader, Luiz Inácio de Silva (Lula).

When Lula lost the 1989 presidential elections to “neo-liberal” Cardoso, the PT started shifting to the right. Its left wing was removed. The effect of the unions and social movements over the party decreased. Lula entered the 2003 elections with a “growth plan with neoliberal principles” and he won.

Both the AKP of Turkey and PT of Brazil enjoyed the wheel of a “growing” economy until the 2008-2009 global crisis. The generosity of the global markets of the time and the abundance of liquidity had lifted the anchor of both countries. Both grew with foreign direct investments, inflowing hot money and generous international loans causing unprecedented foreign resource inflows.

During the period of 2003-2007, while Turkey’s growth rate neared 7 percent, Brazil’s remained around 4 percent. This “dolce vita” period provided the opportunity of the governments in both countries to strengthen their positions.

The crisis year of 2008 did not immediately affect Brazil; Turkey grew less than 1 percent. However, both countries later experienced a negative growth, with Turkey living through a more severe one… In 2010 and 2011, foreign resource inflow came again to both countries. Brazil benefited from China’s growth as its supplier. Even though economies grew, both countries had current account deficit problem and in 2012, the strain of this caused their economies to shrink.

Just like Turkey’s capitalism, Brazil also experienced the outflow of foreign hot money with the emerging of the possibility of a Fed rate hike mid-2013. From that day on, the Brazilian real is losing value against the dollar. The loss of 2015 was the peak, with 45 percent.

In Turkey, the factors of political risk and geopolitical risk are important in foreign capital withdrawal. In Brazil, the withdrawal of foreign capital is more related to the increase in economic risks. Some 20 percent of Brazil’s raw-material-dominated exports are toChina and thus, with the drop in foreign demand and prices, its economy started shrinking, its foreign currency income dropped and its foreign currency balance developed a deficit. Nevertheless, its current account deficits have reached only 4 percent of its national income, while Turkey’s was nearing 8 percent in 2013; in the following low-growth years, it went down to the 4 percent corridor.

Brazil’s political risk

Many analysts consider “a coup attempt” is happening in Brazil as several corrupt parliament members are trying to remove President Dilma Youssef. The circumstances that kept the PT in power for 14 years have changed rapidly after 2010. After 2003, government programs were shaped according to international capital’s demands as well as the local entrepreneurs’.

Brazil took its share from the stagnation following the global crisis. The social support and the welfare perception among the segments the PT almost “bought” rapidly vanished when resources started to dry up. As the crisis deepened, the dominant capital and its international partners focused on efforts to access state resources. When Dilma gave in to neoliberal austerity policies, the popularity of PT crashed.

Analysts express that organizational and/or organic ties have not been established between the PT and the masses it was based on but that the relationship was built based upon interests. When resources dried up, the social support of the populist party vanished. Economy shrank 4 percent, unemployment reached 7 percent, inflation became 11 percent and its currency lost 45 percent in 2015. This is expected to continue throughout 2016.

What Turkey lacks

The risks of Turkey and Brazil were parallel until 2013. Due to different conditions of the two countries, Turkey’s economy was not as shaken as Brazil after 2013; it was able to manage low growth rates. The domestic market somehow continues to contribute 3 to 4 percent to the growth. Even though the political tension and geopolitical risks have not declined, the instability of the world conjuncture keeps the up and down interest of hot money. Construction-based growth helps maintain the support of the masses. Mostly, the propaganda works to suggest that the political stability is under domestic and international threat.

But, beyond all these, there is no climate in Turkey to organize the discontent and turn it into an effective opposition. The opposition in Turkey does not have a free hand as in Brazil: Organizational activities have been weakened and even the freedom of expression is under huge pressure.

The most important thing that Brazil has and Turkey does not have is this…

dış ekonomik, English kategorisine gönderildi | Differences and similarities between the economies of Brazil and Turkey için yorumlar kapalı

Industrial investments continue to stagnate

Mustafa Sönmez -Hürriyet Daily News, 25/4/2016

The loss of appetite in the Turkish economy since 2012 continues to be a problem, even if there was a slight recovery in 2015. The slippage especially in industrial investments is remarkable and, simultaneously, a warning.

Why is industry more important? The reason is that the share of industry in gross domestic product is relatively small at 16 percent but industry constitutes the bulk of exports. The intermediate goods in imports and investment goods are also linked to industrial production. Thus, all the service sectors associated with foreign trade feed on industry. In short, because the manufacturing industry is a sector that has a small share in production but a big role in sustainability, the decline of investments in this sector means a decline in the economy.

Data on 2015 national income that was released at the end of March shows that the contribution of investments in growth that was declared as 4 percent was nearer to one fourth of this figure. In other words, in the growth of 4 points, the contribution of investments was around 1 point (0.9). 2015 was comforting because in 2014, the contribution of investments in the 2014 growth figures of 3 percent was negative. In 2013, just like in 2015, it was around one-fourth. In 2012, it was again negative. Overcoming a period in which growth is unable to take advantage of investments, especially when industry investments slip, and reaccelerating again remain two of the most important issues for Turkey’s economy.

The 2012-2015 period can be described as the “low growth” period. In this period, while growth fell to the 3 to 4 percent band, the situation was created because of a deceleration of investments. In these four years, private-sector investments particularly fell concretely, but in 2015, there was a slight recovery.

In the 2012-2015 period, the average growth was 3.5 percent. It can be seen that the contribution of investments in this period fell to 5 percent. In other words, the contribution from investments to the 3.5 percent growth in this period remained at 0.3 points. Turkey is passing through a period in which investments have fallen considerably compared to previous years.

Stagnation in industry investments

The issue of a slowdown in investments, particularly in the manufacturing industry, has caused more damage. This is because, as said before, the manufacturing industry is a leader. While industry constitutes the body of exports, the intermediate goods and investment goods of imports also depend on industrial production. Thus, all service sectors associated with foreign trade are also nurtured in industry. In short, even though the manufacturing industry has around a 15 percent share in production, because it is a sector that has a huge leading role, any stagnation in this sector actually entails a stagnation in the economy.

When the share of sectors in investments between 2006 and 2015 is examined, it can be seen that the share of the manufacturing industry dropped 6 points from 35 to 29 percent. This drop is mostly due to the private sector refraining from investing in the manufacturing sector. In the same period, there have been increases in the shares of tourism, mining, education and transportation while the share of the other notable investment field, the housing sector, remained at a band of 14 percent and 15 percent. The decline in investments in past years stems from the lack of appetite mostly in manufacturing sector investments rather than the lack of appetite of the private sector.

According to Development Ministry data, in private investments, the share of the manufacturing sector in 2006 was 46 percent. In the following years, both the rate of private sector investments to national income declined, as did the share of the manufacturing industry in private investments. In other words, the lack of appetite in investments in the manufacturing sector caused a fall in all private-sector investments. Total private sector investments declined in real terms in the period between 2012 and 2014, but increased by 6 percent in 2015. While private-sector investments declined in general, the share of manufacturing in 2006 was 46 percent, which then decreased 10 points to 35 percent, the average of the 2012-2015 period.


Incentives

The stagnation of investments in industry can also be observed through the incentives issued regarding the quantity and composition of investments. The incentive system was explained in the 2016 program: “It is the main aim to increase private-sector investments that are necessary for a high growth, by making the investment environment more attractive and encouraging investments. The aim of the practice is [to ensure] investments with added value and a high R&D content, increase employment, exports and production, improve international competitive power and enable the regional potentials to join the economy. ”

In this context, the balance sheets of the past three years of investment incentives demonstrate the lack of appetite once more in the investment in the manufacturing industry.

While incentives were issued for investments worth 96 billion Turkish Liras in 2013, this dropped to 64 billion liras in 2014 before rising to 103 billion liras the following year. The recovery in 2015 is noteworthy; however, when analyzed closely, this increase in the amount of investments was due to one incentive issued to TANAP Doğalgaz İletim A.Ş. worth 23.2 billion liras.

When the sector breakdown of investments are reviewed, it can be seen that only one third of the supported investments of 264 billion liras at current prices in the 2013-2015 period belongs to the manufacturing industry. Services and energy investments seem to have taken similar shares with the manufacturing industry. The intentions to invest in the manufacturing industry were worth 36 billion liras in 2013 but declined to 25 billion liras each in 2014 and 2015. This is another indicator of the lack of appetite related to manufacturing.

The investment environment

If the public sector is excluded, it is up to the political and geopolitical risks as well as the economic risks that determine the investments decisions of both local and international private actors. The international hot money that started withdrawing in mid-2013 with the American Central Bank Fed’s rate hike signal that has rapidly increased the dollar/lira exchange rate made the investor enter a “wait and see” phase. When the increase in the dollar price was followed by the increase in interest rates, domestic consumption which is the main pillar of growth rapidly shrank. This was the most influential factor in the suspension of new investments, particularly investments in manufacturing industry.

Besides economic fragility, the election calendar in Turkey, in which there were three elections in 2014 and 2015, has been another factor resulting in a suspension of investment intentions. In addition to these, the tensions in the Middle East and their ramifications in Turkey, the tensions experienced in neighboring countries have constantly postponed decisions for both domestic and international investors.

Araştırma - Haber, English kategorisine gönderildi | Industrial investments continue to stagnate için yorumlar kapalı

Political shadow over the football industry

Mustafa Sönmez – Hürriyet Daily News, April/18/2016

The popular Simon Kuper book, “Football Against the Enemy,” was an analysis of the football-politics relationship and published in the U.K. in 1994. This study became a “cult book” in a short time and was translated into Turkish in 1996 and has been reprinted several times.

Football has rapidly commercialized and become an industry but it is the Mediterranean basin and Latin American countries where politics have intertwined with football.

Particularly in Turkey… Last week a new stadium, Vodafone Arena İnönü, a football shrine, the new stadium of the football club Beşiktaş was inaugurated. One of world’s most important derbies, the game between Fenerbahçe-Galatasaray, was also played last week.

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Regardless of whether we like it or not, Turkey’s football industry constitutes one of the important pillars of global football.

To make a comparison, the market value of players in the country’s premier league is added to find the market value of the league. For instance, in the English Premier league, there are 544 professionals and their market value is $4.4 billion. The English first league teams are worth $4.4 billion. Spain comes second with their $3.3 billion worth of players. Germany and Italy have $2.6 billion worth of players. France has $1.6 billion worth of professional first league players. Turkey has $1.1 billion while Russia is close to Turkey. Portugal, Belgium and the Netherlands have an asset of football players worth less than $1 billion but they are in the top 10 of Europe.

Balance sheets

Football clubs that have become a large holding need to take into account players’ returns when investing in them. Those that trust in the domestic market can make more sensational investments. When Turkey is viewed from this angle, roughly calculated, $1.1 billion worth of football player investments are remarkable for a national income of $750-800 billion.

This investment is due to the country’s football passion and also the confidence in spending associated with this passion. In Turkey where the minimum wage is 1,300 Turkish Liras ($456), young workers save their week’s pay trying to buy a ticket. This is how big the passion is…

When this is so, football player investments in the country, local and international, reach $1.1 billion.

Unequal power

Industrial football disrupts the balance of power among football clubs in favor of the powerful more every year and this takes the fun out of it. For instance, 58 percent of the $1.1 billion worth of the football player asset belongs to the first four clubs.

Fenerbahçe, with its $174 million, Galatasaray with $150 million, Beşiktaş with 140 million and Trabzonspor with $121 million investments on football players are the top football clubs that have invested in the strongest players for years. The fifth in line is Bursaspor, which has a team worth $71 million; whereas one of the poorest teams, Akhisar, has a team worth $25 million, merely 14 percent of Fenerbahçe’s.

This inequality exists in other countries also. For instance, the top four in the Premier League, Chelsea, Arsenal, Manchester City and Manchester United, constitute 40 percent of the whole league’s assets. In Spain, Read Madrid and Barcelona football players alone are worth 40 percent of the Spanish league. PSG represents 30 percent of the Frenchleague. When the situation is like this, the other 10 to 15 teams are like wall flowers playing in the pitch. The more football clubs are commercialized, the more political actors influence them.
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The new stadium of one of Turkey’s top three clubs, Beşiktaş, started construction in 2013. Its recent opening ceremony attended by President Recep Tayyip Erdoğan and only by Justice and Development Party (AKP) member politicians once more drew attention to the football-politics relationship.

The new stadium is named Vodafone Arena İnönü because communication giant Vodafone is the sponsor. Its inauguration on April 10 was done with a limited invite-only audience while spectators were not allowed in. The Beşiktaş community, especially its most active group, çArŞı, is not on good terms with the AKP. çArŞı, one of the main actors in the 2013 Gezi incidents, was even taken to court on charges of “organizing illegal demonstrations and [an] attempt to topple the government.”

Beşiktaş Chair Fikret Orman said they have spent $100 million for the stadium, all of which they financed themselves. He said they have sold seasonal boxes and that Vodafone did not directly contribute to the construction but according to the sponsorship agreement will make an annual payment. Orman said the income difference between them and the top two clubs Fenerbahçe and Galatasaray has now become 100 million euros, stating that Galatasaray has an income of 157 million euros, Fenerbahçe127 and Beşiktaş 50 million.

Despite inadequate resources and limited means, investments such as transfers of foreign players, constructions of stadiums have multiplied the debts of clubs, creating trouble especially before European football authorities. For instance, behemothGalatasaray has been banned from European cups for one year by UEFA because it failed to meet the criteria. At the beginning of 2016, debts of clubs in the Super league totaled 3.5 billion Turkish Liras. The burden of debt forces clubs to ask assistance from the government, thus obliging them to the shadow of politics.

A project being developed dictates that three state banks will undertake the debts of football clubs and restructure them with low rates for 10 years. According to this project, the debts of clubs to private banks amounting 2.5 billion liras will be undertaken by Ziraat Bank, Halkbank and Vakıfbank. Political steps involving football come in the form of offering infrastructure to club fans. 00
The ruling AKP has especially concentrated on building stadiums in Anatolian cities to lure the masses passionate about football. The Mass Housing Authority (TOKİ) the main aim of which is building cheap houses, has been engaged in stadium constructions.

English, Genel kategorisine gönderildi | Political shadow over the football industry için yorumlar kapalı

Lack of appetite in investments persists in Turkey

Mustafa Sönmez – Hürriyet Daily News, April/11/2016

 Turkey’s economy has been slowing down for the last four years, although there was some recovery in 2015.
The 2015 GDP data, which was announced at the end of March, has shown that the contribution of investments to the economic growth of 4 percent was around one-fourth, equaling 0.9 percent. This figure is comparatively welcome as the 2014 figure was negative. While the contribution of investments was again one-fourth of GDP growth in 2013, the figure was again negative in 2012. How the economic growth can be accelerated again will be one of the main issues challenging the Turkish economy in the near future.


Source:TÜİK database

Growth and investments

Household consumption spending and investments constitute the two pillars of economic growth. In Turkey, the former now plays a bigger role, although the latter was the main source of GDP growth between 2003 and 2007, when Turkey welcomed a huge influx of foreign capital. In those years, a massive foreign capital inflow in the form of FDI, stock exchange investments and foreign loans boosted domestic demand, and Turkey’s economic growth duly hit 7 percent.

This investment spending provided 3 percentage points to the 7 percent in GDP growth during this “dolce vita” period. It means that almost 43 percent of the growth was fueled by investments.

During the 2008-2009 global economic crisis, the Turkish economy shrank, and the country saw an outflow of foreign capital, just like many other countries. Both the foreign exchange rates and interest rates skyrocketed, cooling down investments and loosening expectations.

Source:TÜİK database

By the end of 2009, foreign investors had started to return to Turkey’s stock exchanges, lowering the forex and interest rates. This enabled domestic demand and investments to boom again. The share of investments in the 9 percent of GDP growth hit 60 percent between 2010 and 2011.

The anomaly of the skyrocketing growth in those years was the dangerously rising current account deficit. The share of the current account gap almost totaled 10 percent of the national income. As this was not sustainable, the economy’s administrators announced 2012 as the “year of cooling down,” and the economy closed that year with around just 2 percent growth.

The economic growth declined to an average of 3.5 percent between 2012 and 2015, dramatically pushing down investments, especially by the private sector, although there was some slight recovery in 2015.

Investments by public, private sectors

With the effect of neoliberal economic policies after the 1980s, the share of the public sector started to decrease in total investments, especially in the industrial and energy sectors.

The share of total investments in the national income was 17 percent in 2003. While the private sector made almost 14 percent, the public sector was responsible for just 3 percent of this total.

The share of investments in the national income was around 20 percent, but only 4.5 percent was made by the public sector. Namely, just one-fifth of the investments were made by the public sector.

Investment by sectors

Investments in the manufacturing sector ranked highest, although the share of the sector has been decreasing in recent years. This industry is followed by the transport and communications and housing sectors’ which among them conducted around two-thirds of all investments.

As a result of a massive privatization program, the share of the state in investments in the manufacturing sector has contracted dramatically. For instance, 95 percent of the investments in the sector were made by the private sector.

The share of state investments in the transport and communications sector has been much higher than in others. While some 41 percent of investments in this sector were made by the public sector, the remaining 59 percent was by the private sector.

Housing investments, which are of great importance for the country’s construction-based growth model, have taken around 20 percent of the share in total investments with the private sector making around 99 percent of these construction investments. The private sector has also had the lion’s share in tourism investments, which constitute around 6 percent of total investments.

The health sector and the education sector used to be dominated by the public sector in Turkey. The private sector has, however, started to increase its share in health and educational investments as well. These two sectors had around a 10.5 percent of share in total investments in 2015. While almost half of educational investments were made by the private sector, around three quarters of health investments were made by private companies rather than the state.

The energy sector has received 4 percent of total investments. Although the share of the public sector in energy witnessed a gradual decline, its share has increased to 31 percent with planned nuclear power plant investments.

The state’s share in agricultural investments is around 60 percent with huge irrigation investments as part of the Southeast Anatolia Project as well as in the Konya plains.

The public sector has made investments mainly in transportation, education, agriculture and partly in energy. On the other hand, the private sector has taken the lion’s share in investments in manufacturing, transportation and communications, housing, tourism, health, energy and mining.

Deceleration in investments

The slowdown in investments in the last five years has not been due to the deceleration in public investments but in private investments. The state has continued making mainly infrastructure, energy and irrigation investments, preserving its 20 percent share in total investments in a bid to reach growth targets in line with budget limits. The state is expected to keep investing to realize its target of 4.5 percent annual growth in 2016.

The private sector, however, has apparently cooled down its investments, mainly in the manufacturing sector, in light of the slowdown in domestic and foreign demand. While the share of the private sector in manufacturing investments was 40 percent in 2008, this figure regressed to 35 percent in 2015.

Investment climate 

Both local and foreign businesses make their investment decisions by reviewing economic conditions and calculating political and geopolitical risks. Investors have adopted a “wait and see” tendency after the U.S. Federal Reserve started to signal a rate hike in 2013, precipitating an outflow of hot money and a rapid increase in U.S. dollar-Turkish Lira parity. The rise in the U.S. dollar’s value has pushed up interest rates, shrinking domestic consumption, which is the main constituent of economic growth. This has been the main reason why the private sector cooled down its investments, mainly in the manufacturing sector.

In addition to the rising economic fragilities, an intensive election cycle in Turkey in 2014 and 2015 was also responsible for more cautious behavior by investors.

The escalating tensions in the Middle East and their reflections in Turkey as well as the country’s rising problems with some of its neighbors have also restrained local and foreign investment decisions.

It will be possible for Turkey to decrease its unemployment rate to around 10 percent only through new investments. If Turkey wishes to revive its investment climate once more, it must undertake critical economic, political and diplomatic reforms.

April/11/2016

Turkey’s economy has been slowing down for the last four years, although there was some recovery in 2015.

The 2015 GDP data, which was announced at the end of March, has shown that the contribution of investments to the economic growth of 4 percent was around one-fourth, equaling 0.9 percent. This figure is comparatively welcome as the 2014 figure was negative. While the contribution of investments was again one-fourth of GDP growth in 2013, the figure was again negative in 2012. How the economic growth can be accelerated again will be one of the main issues challenging the Turkish economy in the near future.

Growth and investments

Household consumption spending and investments constitute the two pillars of economic growth. In Turkey, the former now plays a bigger role, although the latter was the main source of GDP growth between 2003 and 2007, when Turkey welcomed a huge influx of foreign capital. In those years, a massive foreign capital inflow in the form of FDI, stock exchange investments and foreign loans boosted domestic demand, and Turkey’s economic growth duly hit 7 percent.

This investment spending provided 3 percentage points to the 7 percent in GDP growth during this “dolce vita” period. It means that almost 43 percent of the growth was fueled by investments.

During the 2008-2009 global economic crisis, the Turkish economy shrank, and the country saw an outflow of foreign capital, just like many other countries. Both the foreign exchange rates and interest rates skyrocketed, cooling down investments and loosening expectations.

By the end of 2009, foreign investors had started to return to Turkey’s stock exchanges, lowering the forex and interest rates. This enabled domestic demand and investments to boom again. The share of investments in the 9 percent of GDP growth hit 60 percent between 2010 and 2011.

The anomaly of the skyrocketing growth in those years was the dangerously rising current account deficit. The share of the current account gap almost totaled 10 percent of the national income. As this was not sustainable, the economy’s administrators announced 2012 as the “year of cooling down,” and the economy closed that year with around just 2 percent growth.

The economic growth declined to an average of 3.5 percent between 2012 and 2015, dramatically pushing down investments, especially by the private sector, although there was some slight recovery in 2015.

Investments by public, private sectors

With the effect of neoliberal economic policies after the 1980s, the share of the public sector started to decrease in total investments, especially in the industrial and energy sectors.

The share of total investments in the national income was 17 percent in 2003. While the private sector made almost 14 percent, the public sector was responsible for just 3 percent of this total.

The share of investments in the national income was around 20 percent, but only 4.5 percent was made by the public sector. Namely, just one-fifth of the investments were made by the public sector.

Investment by sectors

Investments in the manufacturing sector ranked highest, although the share of the sector has been decreasing in recent years. This industry is followed by the transport and communications and housing sectors’ which among them conducted around two-thirds of all investments.

As a result of a massive privatization program, the share of the state in investments in the manufacturing sector has contracted dramatically. For instance, 95 percent of the investments in the sector were made by the private sector.

The share of state investments in the transport and communications sector has been much higher than in others. While some 41 percent of investments in this sector were made by the public sector, the remaining 59 percent was by the private sector.

Housing investments, which are of great importance for the country’s construction-based growth model, have taken around 20 percent of the share in total investments with the private sector making around 99 percent of these construction investments. The private sector has also had the lion’s share in tourism investments, which constitute around 6 percent of total investments.

The health sector and the education sector used to be dominated by the public sector in Turkey. The private sector has, however, started to increase its share in health and educational investments as well. These two sectors had around a 10.5 percent of share in total investments in 2015. While almost half of educational investments were made by the private sector, around three quarters of health investments were made by private companies rather than the state.

The energy sector has received 4 percent of total investments. Although the share of the public sector in energy witnessed a gradual decline, its share has increased to 31 percent with planned nuclear power plant investments.

The state’s share in agricultural investments is around 60 percent with huge irrigation investments as part of the Southeast Anatolia Project as well as in the Konya plains.

The public sector has made investments mainly in transportation, education, agriculture and partly in energy. On the other hand, the private sector has taken the lion’s share in investments in manufacturing, transportation and communications, housing, tourism, health, energy and mining.

Deceleration in investments

The slowdown in investments in the last five years has not been due to the deceleration in public investments but in private investments. The state has continued making mainly infrastructure, energy and irrigation investments, preserving its 20 percent share in total investments in a bid to reach growth targets in line with budget limits. The state is expected to keep investing to realize its target of 4.5 percent annual growth in 2016.

The private sector, however, has apparently cooled down its investments, mainly in the manufacturing sector, in light of the slowdown in domestic and foreign demand. While the share of the private sector in manufacturing investments was 40 percent in 2008, this figure regressed to 35 percent in 2015.

Investment climate

Both local and foreign businesses make their investment decisions by reviewing economic conditions and calculating political and geopolitical risks. Investors have adopted a “wait and see” tendency after the U.S. Federal Reserve started to signal a rate hike in 2013, precipitating an outflow of hot money and a rapid increase in U.S. dollar-Turkish Lira parity. The rise in the U.S. dollar’s value has pushed up interest rates, shrinking domestic consumption, which is the main constituent of economic growth. This has been the main reason why the private sector cooled down its investments, mainly in the manufacturing sector.

In addition to the rising economic fragilities, an intensive election cycle in Turkey in 2014 and 2015 was also responsible for more cautious behavior by investors.

The escalating tensions in the Middle East and their reflections in Turkey as well as the country’s rising problems with some of its neighbors have also restrained local and foreign investment decisions.

It will be possible for Turkey to decrease its unemployment rate to around 10 percent only through new investments. If Turkey wishes to revive its investment climate once more, it must undertake critical economic, political and diplomatic reforms.

Araştırma - Haber, English kategorisine gönderildi | Lack of appetite in investments persists in Turkey için yorumlar kapalı

Zarrab, ekonomi, seçimler ve başkanlık sistemi…

Mustafa Sönmez, İrfan Aktan’ın 4 Nisan 2016 tarihli Nasıl Yapmalı? programında Rıza Zarrab, Türkiye ekonomisinin son durumu, AKP’nin baskın seçim planları ve başkanlık sistemi üzerine sorularını yanıtlıyor.

 

Genel, Video - TV Arşivi kategorisine gönderildi | Zarrab, ekonomi, seçimler ve başkanlık sistemi… için yorumlar kapalı

Türkiye ve Dünya ekonomisindeki eğilimler

Ege Bölgesi Sanayi Odası (EBSO) Meclis toplantısında 28 Mart 2016 günü Mustafa Sönmez tarafından gerçekleştirilen Türkiye ve Dünya ekonomisindeki eğilimler konulu sunumuna buradan erişebilirsiniz. Türkiye ve Dünya ekonomisindeki eğilimler

Daha çok galeri | Türkiye ve Dünya ekonomisindeki eğilimler için yorumlar kapalı

Political climate obstructing growth

 Mustafa Sönmez – Hürriyet Daily News   April/04/2016

The onset of spring has seen a rally in emerging economies like Turkey, but the country’s political risks are likely to rule out further growth

The European Central Bank’s negative step on interest rates, as well as the U.S. Fed’s postponement of its rate operation, look as if they have created a doping effect on “emerging economies,” which also includes Turkey.

Global funds that withdrew from “emerging economies,” especially in 2015, and took their positions based on the Fed’s rate hikes turned their faces again to their “temporary parking spots” in mid-February.

With this shift, financial prices in emerging economies have moved upward, precipitating a rally. In recent days, the pace of this movement has slightly slowed down but, nevertheless, everybody has started talking about a “spring of the emerging countries,” but its duration cannot be estimated. While the terror that has spread toEurope and the wave of profit realization has disrupted the recent spring atmosphere, this new situation again appears worthy of emphasizing.

Turkey, Brazil, Russia, South Africa, Indonesia, Mexico, Argentina, India… In all these developing countries, recovery signs are continuing. Even though it has not yet been reflected in base quantities, positive expectations for the future have been born…

There is already more talk that developing economies might be able carry this rally to the medium and long term to make a growth leap.

Situation in Turkey 

In Turkey’s markets as well, movements that go in parallel with this financial rally provoked by global optimism are being experienced. As in developing countries, capital inflow has accelerated. Until mid-February, instead of foreign net inflows, withdrawals were observed – something that was dominant in 2015. When calculated free of the foreign exchange and market price effects, from mid-February until mid-March, a net capital inflow of $2.5 billion was observed.

With this inflow, as expected, the Turkish Lira gained value. The dollar peaked at 3.05 liras on Jan. 22, and then started going down. With net capital inflows, 1 dollar went down to 2.88 lira in mid-March.

With this development, market interests fell. The Central Bank’s average funding interest rate also joined and fell 25 base points. Asset prices went up. In parallel with these, expectations rose that foreign capital investment in Turkey would increase.

The same question for other emerging countries is valid for Turkey as well: Is it possible for Turkey’s economy to carry this rally further and convert it into a real recovery?

Some think that this transformation could easily be done. Moreover, some even say that Turkey’s economy might be able to positively differentiate itself from other developing countries.

Medium targets

Will the negative interest rate in the European Union and Japan and the situation created by the cautious interest rate in the United States help Turkey meet its 2016 targets?

According to the Medium Term Program (OVP), the growth rate target is 4.5 percent, inflation 7.5 percent and unemployment 10.2 percent. One obstacle is falling tourism revenues. Russian sanctions and the worsening image of the country are others.

A calm assessment could be that the structural weaknesses in Turkey’s economy are continuing. Together with the added economic and geopolitical negativities of the period, it is unlikely that this rally will turn into a growth trend.

The lack of savings is at the top of the list of Turkey’s economic vulnerabilities. This shortcoming will cause the investment performance of Turkey to become dependent on foreign resources.

Low demand 

When we look at the demand categories that would support growth, the situation is not pleasing either. Both domestic and foreign demand have not fully recovered. Foreign demand is affected by international developments as well as domestic developments. Exports and imports have slowed down at the same time. The slowdown in imports is because of the halt in the growth rate and the halt in investments. The drop in oil prices lately has dropped the energy bill which contributes to the overall nominal decrease. Exports, on the other hand, are to a great extent associated with Turkey’s market losses in neighboring countries, with the losses in the Russian and Iraqi markets particularly striking.

While commodity exports have slowed down recently because of the impasse especially in tourism, there is a loss in service exports.

All of these are not issues that can be corrected by the financial rally. Thus, there is not much hope from foreign demand. Domestically in terms of public finances, even though the Medium Term Program has ventured some spending, the budget deficit in the program is not projected to exceed 1.5 percent. The most important component of the situation facing the international audience is the central budget – fiscal discipline. The administration does not want to weaken this.

In the monetary zone, interest rates are relatively high. The highness of the inflation is preventing the loosening of money and a decrease in the interest rate. On the other hand, the high-level course of both economic risks and geopolitical risks is forcing the interest rate upward. These are all trends that are not likely to change with the fact that the interest rate climate seems to be recovering.

Expectations  

The vulnerability of Turkey’s economy is increasing with the disruptions of recent expectations. The latest trends in expectation surveys show that the disruption has increased. There could be many reasons for that, but the most important is the tensions nurtured by politics and the climate of clashes.

The clashes in the southeast since June 7, 2015, that resemble a covert war, together with the massacres and terror acts in big cities that have sent everyone inward have all increased Turkey’s political risks. The tension ongoing in the geopolitical arena is also important.

Now, the arrest of businessman Reza Zarrab in the U.S. for money laundering has been added to this. The legal process that started with this arrest is likely to have reflections in Turkey. There are loud suggestions that this operation could force open closed files in Turkey. The pro-government media has interpreted this as a coup attempt by the U.S. against the government.

In these circumstances, it is difficult to motivate local or international business leaders to undertake new investments and new decisions. It is also not easy to convince all kinds of consumers to consume and use loans for consumption.

In such an environment, it does not seem very easy to turn the financial rallies that have been formed with the winds blowing from outside into chances for growth.

Araştırma - Haber, English kategorisine gönderildi | Political climate obstructing growth için yorumlar kapalı

ABD, Zarrab kara kutusunu nasıl kullanır?

 

 

Türkiye’de 17-25 Aralık yolsuzluk suçlamasının ana aktörü, RTE’nin “hayırsever işadamı” olarak kolladığı İranlı işadamı Reza Zaarrab’ın , 19 Mart’ta  Miami’de gözaltına alınıp tutuklanması, sıradan bir “kara para” soruşturması gibi takdim edilmek istense de, öyle değil. Bu, ABD-Türkiye ilişkilerinde yeni bir kilometretaşı, hatta bir hesap sorma bahanesi. Tutuklama ile başlayan sürecin nereye evrileceği, içine kimleri, neleri katacağı ve aslında ABD’nin, neyi, kimleri  hedeflediği önemli

Suç ne, neden şimdi?

Hatırlanacaktır;  2010’da ,önce Birleşmiş Milletler İran ile ilgili bir karar aldı. “Hassas nükleer faaliyet” için kullanılabilecek her türlü askeri ve sivil mal ve hizmetin ticaretini ve bu ticaretten doğan para transferlerini yasakladı BM. Ama, bu karar ABD’yi kesmedi. İran’ın enerji gelirlerini de nükleer faaliyette kullanabileceği savıyla, bu enerji ticaretinden doğan dolar transferini yasa dışı ilan etti, kararı ABD Senatosundan geçirdi. Artık İran’ın enerji gelirleri “kara para” sayılacak ve bu para transferine bulaşan kara para aklayıcısı ilan edilecek ve cezalandırılacaktı. Kısa süre sonra Avrupa Birliği de BM kararıyla yetinmediğini gösteren ve İran’ın petrol ve gaz endüstrisine teknoloji ve donanım satışını yasaklayan bir yaptırım  paketini yürürlüğe koydu. Ancak bu girişim de İran’ın petrol ve doğal gaz satışına ve bu satıştan elde edilen parasal transferlerine engel olacak mıydı? Hayır,olmadı. Türkiye bunlara uymadı.

ABD’den heyetler Türkiye dahil, İran ile enerji ticareti yapan ülkelerde toplantılar yaptılar, özellikle bankaları uyardılar. İran ile ticaretin “Terörün finansmanı ve Finansal suç” kapsamına gireceğini bildirdiler. ABD’nin uyarısı içeriği ve üslubu itibarı ile Türk bankalarını endişelendirmişti. Ama daha sonra Zarrap’tan çok değerli saat rüşveti aldığı da ortaya çıkan dönemin Devlet Bakanı Zafer Çağlayan,“Bizi sadece BM’nin kararı bağlar. ABD’ninki değil. … bankaların cesaretli olması lazım”demişti.

ABD, özellikle Türkiye’ye  2010 boyunca uyarılarını yaptı. Ancak, bu uyarılar dikkate alınmadı. İran hem Türkiye’den alacağını, hem de Hindistan’dan alacaklarını Reza Zarrab’a vekalet vererek Halkbank’ı aracı kullanarak külçe altın biçiminde transfer ettirdi.

Kafa tutarak…

Önceki yazılarımdan kısaca özetleyeyim; “Ya­zı­la­rı­mı İs­tan­bul CHP mil­let­ve­ki­li Umut Oran, bir öner­ge ile 13 Tem­muz 2012’de Halk Ban­ka­sı­’n­dan so­rum­lu Ali Ba­ba­ca­n’­a şöy­le yö­nelt­ti; “ Mus­ta­fa Sön­mez ,al­tın ih­ra­ca­tın­da hiç esa­me­si okun­ma­yan hat­ta 2007, 2008, 2009 yıl­la­rın­da sı­fır pa­yı olan İra­n’­ın, bir­den­bi­re al­tın ih­ra­ca­tın­da yüz­de 76 pay sa­hi­bi ol­du­ğu­nu bil­dir­di (…). İra­n’­dan alı­nan pet­rol ve do­ğal­ga­zın pa­ra­sı­nın Halk Ban­ka­sı­’n­da tu­tul­du­ğu, bu pa­ra­nın al­tı­na dö­nüş­tü­rü­le­rek, ba­zen zırh­lı araç­la sı­nır­da İran Mer­kez Ban­ka­sı yet­ki­li­le­ri­ne tes­lim edil­di­ği, ba­zen de uçak kar­go­suy­la İra­n’­a gön­de­ril­di­ği doğ­ru mu­dur? Bu ger­çek­ dı­şı al­tın ih­ra­ca­tı­nın TÜ­İK’­in he­sap­la­dı­ğı bü­yü­me ra­kam­la­rı­na et­ki­si yok mu­dur?”
Ba­ba­can, 22 Ka­sım 2012’de bu ko­nu­ya şöy­le açık­lık ge­tir­di; “Tür­ki­ye ola­rak İra­n’­dan al­dı­ğı­mız ga­zın pa­ra­sı­nı biz TL ola­rak İra­n’­ın Tür­ki­ye­’de­ki he­sa­bı­na ya­tı­rı­yo­ruz. Fa­kat İra­n’­ın o pa­ra­yı do­lar ola­rak ken­di ül­ke­si­ne gö­tür­me­si müm­kün de­ğil, ulus­la­ra­ra­sı kı­sıt­la­ma­lar, AB­D’­nin yap­tı­rım­la­rı se­be­biy­le. Do­la­yı­sıy­la İran, bu­nu dö­viz ola­rak ken­di ül­ke­si­ne gö­tü­re­me­yin­ce, o TL’­yi ken­di he­sa­bın­dan çe­ki­yor, al­tın alı­yor pi­ya­sa­dan. Al­tı­nı ken­di ül­ke­si­ne gö­tü­rü­yor. Bu­nu na­sıl gö­tü­rü­yor bil­mi­yo­rum, ama işin özü bu.”

Ba­ba­ca­n’­ın “na­sıl gö­tü­rü­yor, bil­mi­yo­ru­m” de­di­ği­ni, bu­gün rüş­vet­le it­ham edi­len öte­ki ba­kan ar­ka­daş­la­rı bi­li­yor­du.

TÜİK ve Merkez Bankası verilerine göre, Türkiye, 2010-2013 arasında yaklaşık 31 milyar dolarlık külçe altın ithal etmiş ve bunun üçte ikisini 20,2 milyar dolarlık kısmını ihraç etmişti. Yani, İran mutemedi Reza Zarrap, Halk Bbankası’ndan TL alacaklarını külçe altına dönüştürüyor,  İran’a doğrudan, bazen de BAE üstünden  transfer ediyordu.  Hindistan’ın ödemelerinde de aynı kulvar kullanılıyordu.

eeiuKaynak:TÜİK;TCMB

Kuşkusuz, Zarrap’ın bu transferi yaparken devletin himayesine, kollanmasına ihtiyacı vardı. Onu da 17-25 Aralık dinlemelerinden ortaya çıktığı gibi İçişleri Bakanı Muammer ve oğulları, Egemen Bağış, Devlet Bakanı Zafer Çağlayan bütün yetkilerini kullanarak yapmış ve hizmetlerinin karşılıkları ise ortaya çıkan ve çıkmayan miktarlarda ödenmişti.

RTE’den habersiz?

Bütün bunlardan RTE’nin bihaber olması mümkün müydü? Reza’dan Bey diye söz eden ve hayırsever bir işadamı olduğunu bildiren, Halkbank genel müdürünün evinden ayakkabı kutusundan çıkan rüşvet paralarını, Balkanlardaki bir cami yaptırma derneğine bağış diye aklama çabasına giren RTE, bu çarkın nasıl dışında olabilirdi?

Hindistan’dan İran’ın  alacaklarına da kol-kanat gererek gerçekleştirilen bu para transferi ile AKP rejimi , sadece avantalardan yararlanmakla kalmıyor, ayrıca bölgeye ve dünyaya, “ABD beni ırgalamaz” mesajı veriyor ve kendince kafa tutuyordu. “Bölgesel güç” olma iddiasını böylece sergiliyordu!…

ABD’nin hesabı…

Koyduğu ambargonun AKP hükümetince cüretle delindiğini gören ABD, sessiz ve derinden soruşturmalarını sürdürüp dosyasını hazırladı. Ne zamana kadar? Geçen haftaya…Peki niye bu kadar bekledi? Üstelik İran ile nükleer gerilimini 2015’te yaptığı görüşmelerle aşıp yeni bir sayfa açmış iken bu hesabı niye kapatmadı ? Bunun için Zarrap, neden Miami’ye gitti? Zarrap ile aynı işi yapan ve ortak oldukları bildirilen Babek Zencani’nin İran’da rejimi 3 milyar dolar dolandırdığı gerekçesiyle idama mahkum ettirilmesinin, Zarrap’ın kararında etkisi var mıydı? Bunlar, elbette zamanla gün ışığına çıkacak.

Ama bilenen şu;  ABD’de Rıza Sarraf adına açılan dava ABD Başkanı’na “ulusal güvenliği ve dış politikasına yönelik sıra dışı ve olağanüstü tehditlerin üstesinden gelme” yetkisi veren “Uluslararası Acil Ekonomik Güçler Yasası”na aykırılıktan açıldı. Başka bir ifade ile bu davada ABD’nin ulusal güvenliğine ve çıkarları hilafına, Türkiye’nin İran için bu ülkeye ekonomik ve mali destek vermek amacı ile almış olduğu tasarruflar sorgulanacak. Mali stratejist Selva Tor’un da belirttiği gibi; “ …çatışmanın merkezinde Türk-ABD ilişkilerinin parasal güç dengesinde Türkiye’ye yöneltilmiş kızgınlık ve hesap sorma ihtiyacı olduğu açık bir şekilde görülüyor.(*)”

Ayar verme imkanı

Başka bir ifade ile, AKP rejiminin hem rüşvete bulaşarak hem ABD’yi karşısına alarak gerçekleştirdiği bu icraat, şimdi ABD’nin elinde tuttuğu “Zarrap kara kutusu”  ile ABD’ye, “Ak faşizme ayar verme” imkanı sağlamış durumda. ABD’nin şöyle ya da böyle Ak faşizme bir ayar vereceği, ayarın iç siyaset kadar Orta Doğu siyasetini kapsayacağı ortada. ABD, Ak faşizmin totaliterleşme planlarından, Türkiye’yi hızla kutuplaştırarak iç savaş iklimi yaymasından, PKK-PYD konusunda ABD ile frekans uyuşmazlığından, Suriye meselesinde uyumsuzluğundan,  ülke içinde TÜSİAD’ta örgütlü işadamlarını baskılamasından, genelde güçler ayrımını hiçe saymasından, medyaya, ifade özgürlüğüne uyguladığı yoğun baskılardan , elçileri aracılığıyla ya da saray sözcüleri aracılığıyla eleştirildenden de anlaşıldığı kadarıyla, hoşnutsuzdur.

Saray yanaşması medyanın Zarrap’ın tutuklanmasının hemen ardından bunun “RTE’ye darbe, Fetö’nün ABD’yi arkasına alarak saldırısı” olarak nitelemesi, paniği boşuna değildir.

Şimdi ABD, elinde Zarrap manyetosu ile akımı alçaltıp yükseltme, Zarrap ile birlikte, ona, eylemini kolaylaştırma, icra imkanı tanıyan AKP’li bakanları RTE’ye varıncaya kadar dava kapsamına alma şansına sahiptir. Bunu ne kadar yapacağı, sınama-yanılma ile mi yapacağı, yaşanarak görülecektir.

(*)http://ww.aljazeera.com.tr/gorus/buyuk-resmin-kucuk-adami-sarraf

 

 

Araştırma - Haber kategorisine gönderildi | ABD, Zarrab kara kutusunu nasıl kullanır? için yorumlar kapalı

Turkey under the influence of hot international winds and cold domestic winds

Mustafa Sönmez – Hürriyet Daily News March /28/ 2016

Interesting days have begun for Turkey and the like “emerging countries.” The central countries have loosened their monetary policies and money is again pouring into emerging countries… This creates the effect of a hot wind…

However, cold winds are blowing in the domestic climates of emerging countries, primarily Turkey. This situation decreases the effect of the hot wind. Nevertheless, those emerging countries with a warmer domestic climate have an opportunity to breathe, even if it is for only a couple of months.

What about Turkey? What do Turkey’s tense political climate, increasing terror barometer and associated non-decreasing risks cause the country to lose? Everybody is curious and debating.

Hot winds

As 2015 was ending, the fear of a repetition of the 2008 shock and the global crisis recurring was widespread. Global markets starting from December 2015 had entered the sales period. Sales intensified in January. In such an environment, even though the U.S. Central Bank (Fed) had made its first rate hike in 2015, it started giving signals that it would hit the brakes. It skipped the hoped for rate hikes in March.

At the end of January the Japanese Central Bank decided on negative interest rates. The European Central Bank announced on Jan. 21 that it would increase monetary expansion. It started this practice in March. Jan. 21 at the same time remained the trough of market deteriorations. Oil prices fell to $27.10.

The policy changes and the verbal guidance of the EU, Japanese and U.S. central banks stopped the downward course. Recovery started in the second half of February.

It became clearer that the U.S., at least for a while, would not hike rates in order to not disrupt the markets. The EU, Japan and China would continue monetary expansion and the negative interest rate practice would go in on. It may be expected that the global risk appetite that was domineering during the month of March together with the warm spring winds of the EU anchor will continue until the start of summer.

The Fed’s gesture

It is as if the Fed, by postponing the rate hike, made the biggest gesture to emerging countries… The possibility of the Fed increasing rates has been a nightmare for developing countries for a long time. It is known that as a result of rate hikes, the capital inflow toward these countries rapidly slows down. Such a development causes a shrinkage of resources, increase of rates and devaluation of local currencies, resulting in a loss of growth momentum.

The negativity caused by the Fed is not limited to only this. All these developments, especially the changes in the foreign exchange rates, cause volatility to increase in these countries. For this reason, almost all emerging countries await Fed meetings with a fearful tenseness. After any meeting when rates do not change, these countries are greatly relieved. When the Fed’s decisions are viewed from this simple framework, then any Fed meeting where rates are not increased is like a gesture to emerging countries.

It is possible to define the method that the global system has discovered and the structure it has formed after the 2008 global crisis against one if its major turbulences as “artificial, temporary and instable.”

However, there is not much of a game plan either. This environment that forms with the steps the Fed takes will continue as long as it operates. There is no prediction about the next move.

Everybody is now focusing on living through this spring without knowing what the summer will bring…


Spring in emerging countries

Following the moderate steps in the center, the global risk appetite rose again. Emerging countries are regarded as temporary parking lots. Capital has started flowing to emerging countries, where rates have been kept high since the 2008 crisis. It looks as if emerging countries will continue to be parking lots, at least through the first half of the year.

Because the Fed did not increase rates, the dollar lost value and as a result of this the euro and currencies of emerging countries and gold gained value. The one day loss of the dollar index reached 1.6 percent. The euro on the other hand increased 2.6 percent. The exchange rates of emerging countries according to the JP Morgan Index increased 2.1 percent. Gold prices went up from $1.226 to $1.272 in one day, increasing 3.7 percent.

It was observed the risk premiums of emerging countries went down in February and March. The Credit Default Swap (CDS) of Brazil, which has the highest risk, fell 14 percent in mid-March compared to the February average. In risk listing, South Africa is second and Russia is third.

Spring in Turkey

Turkey’s economy also took its share of the international hot winds. The dollar went down to 2.84 against the Turkish Lira around mid-March. Also, 10-year bond rates went down 25 base points to 10.25 percent.

The bourse went above 80,000 points. Turkey’s risk premium, its CDS, was 295 in January and it had an average of 299 in February because of the political and geopolitical tension experienced. It went down to 268 in mid-March. With the effect of these, an early spring began.

From the second half of February until mid-March, when free of exchange rate effects and market price effects, a net portfolio inflow near $2 billion was experienced. With the effect of this inflow, exchange rates relaxed and the price of the dollar, which had peaked on Jan. 22 at 3.05 liras, relaxed in February and March. There were days around mid-March when it went below 2.85 liras.


Cold winds

However, Turkey also has cold domestic winds which immediately chill these blowing, hot winds. They have to be taken into consideration as well. There is the Russian embargo on one hand and on the other domestic terror and the Syrian effect. They are all pressuring the economy from all directions. This effect decreases exports, tourism and contracting services.

The concerns about domestic terror and security have reached dimensions where they restrict domestic tourism, consumption, trade and economic activities. Bombs that went off in Istanbul’s Sultanahmet  Square and Ankara’s Kızılay Square, as well as Istanbul’s İstiklal Avenue, have caused the thinning of city centers and crowded venues in big cities, primarily in Istanbul, and has spread fear in citizens who are reluctant to go out on the street. There is a serious stagnation in tourism. It is also observed that people refraining from using mass transportation are jamming traffic.

The effects of all these developments are less consumption, more fear, less production and less generation of services. The potential growth is being restricted. Moreover, payment chains, check payments and loan repayments are disrupted.

Suicide bombs have caused tourism reservations for this year to remain low. Especially congress tourism and Istanbul reservations have suffered huge blows. International meetings and cruise tourism no longer exist.

Business and touristic trips to southeastern and eastern provinces are almost nonexistent and even big cities are affected. The southern resort province of Antalya is affected the most from the Russian effect.

The warm international winds, even though they may be blowing for only a couple of months, should be used as ammunition for future tough times, but this depends on the moderation of the domestic cold winds. The path to this passes through the establishment of a peaceful and democratic climate domestically and regionally. Otherwise, the economy may be vulnerable to the harsh waves that will strike in the second half of the year.

Araştırma - Haber, English kategorisine gönderildi | Turkey under the influence of hot international winds and cold domestic winds için yorumlar kapalı

How hot money might temporarily park in emerging markets

Mustafa Sönmez – Hürriyet Daily News, March/ 21/2016

 Last year was regarded as a new milestone after the 2008-2009 crisis. The expansionary monetary policy adopted to overcome the crisis was to end with the U.S. Central Bank, the Fed, hiking rates, supposedly ushering in a new era.
When it was almost certain that a rate hike was to happen in 2015, short-term capital movements – so-called “hot money” – turned their faces to the United States from emerging countries like Turkey where they had parked for a long time. This situation decreased the appetite toward many countries including Turkey, and capital withdrawals occurred, meaning all local currencies lost value against the dollar.

Losses of 2015

The rate of loss could further increase depending on the economic fragilities of each country as well as their political and geopolitical risks. For instance, the average value of the Russian ruble was 38.5 percent against the dollar in 2014; in 2015, the average exceeded 61 percent.

Following the ruble is the Brazilian real. The currency lost 42 percent of its value against the dollar in 2015 compared to its value in 2014. Colombia also experienced a 37.5 percent devaluation.

Northern Europe’s rich Norway devalued its krone according to the changing climate at a rate of 28 percent.
And in Turkey, the 2014 average of the dollar was 2.19 Turkish Liras, but the average in 2015 was 2.72 liras. The loss has exceeded 24 percent.

The local currencies of two other emerging countries of Europe, Hungary and Poland, lost 20 percent, while the Czech currency lost around 18 percent.

In other regions, there were losses against the dollar. In Asia, the Malaysian, Indonesian and South Korean currencies lost between 8 and 19 percent. In Japan, the yen was devalued by nearly 15 percent in 2015.
India, which is in a special situation with a remarkable growth that has distinguished it from others to a certain degree, the loss of the rupee remained at 5 percent.


Different climate in 2016

When 2015 ended and 2016 began, the month of January was full of signs that the 2015 climate was continuing, but after February, the climate changed.

Since the first day of 2016, conditions originating from China have impacted all markets; they then began recovering after Jan. 21. Toward the end of February, the sun came up and in March, the financial weather turned sunny. There was more than one factor playing a role in this climate change.

The Fed, in the face of the events in global markets and the expectations of a slowdown in the world economy, gave signals that it would further slow the rate hikes…

Despite the recent strong employment figures, there was no interest rate hike in the March meeting. The abundance of money waiting to be withdrawn with the rate hike and the dollar liquidity that are remaining in the markets support the global risk appetite. The short-term capital movements have started turning their faces again to “emerging markets” that they had been distanced from.

Europe, Japan

Even though it is not known how long it will last, one other wind that strengthened the new climate is from Europe. Europe has not been especially successful, particularly due to the effect of the drop in oil prices, in creating inflation. Once more, a time frame has started in which negative interest rates have become deeper and the purchase of bonds has increased. When a statement was released at the ECB meeting at the end of January, investors started taking their positions and looking for new destinations to park their money.

Similarly, the Japanese Central Bank took a step toward monetary expansion. At the end of January, Japan changed its benchmark interest rate to negative. This has been another factor supporting the global risk appetite and steering investors toward emerging markets.


Emerging country currencies

The new climate, which started at the beginning of February although it remains unclear how long it will last, began as an investment inflow to emerging countries, allowing local currencies to gain value against the dollar. When January and February averages, plus the first half of March, are compared, one of the emerging currencies, the South African rand, gained value of around 4 percent against the dollar. Among other currencies that gained value slightly are Malaysia, Indonesia and Chile. Also the yen gained value against the dollar at more than 3 percent.

Among the emerging currencies, the Brazilian real and the Turkish Lira stood out with value gains of around 3 percent. The January average of the lira was 3.02; it went down to 2.94 after February.

Competition for attracting investments

The return of the interest of global funds to emerging countries and the increase in their risk appetites also make the competition to attract capital fiercer. By offering high yields to global funds, there are attempts to draw more capital.

It was for the benefit of developing country bonds that investors turned to higher interest rates because of the current negative interest rates in Europe and Japan.

Turkey, for the first time since April 2015, will issue dollar bonds. The Undersecretariat of the Treasury has authorized Bank of Amerika Merrill Lynch, Citigroup and Deutsche Bank to issue bonds in dollars due 2026.

Russia is also expected to return to the Eurobond market. For the first time since 2013, Russia contacted 25 foreign banks for Eurobonds with the hope of returning to the international loan market.

Poland, among the emerging countries of Europe, was the first developing country that was able to return to international markets by selling 1 billion euro bonds.

Bulgaria also joined the countries wanting to take advantage of low interest rates as it issued two-year Eurobonds.

On the other hand, Brasilia has issued 10-year bonds with 6.125 percent interest rates for $1.5 billion dollars. Argentina is another country planning to return to the markets. Experts state that if Argentina realizes its plans of borrowing $15 billion, then it will break the record for developing countries in 2016. Chile, on the other hand, sold 1.2 billion 10-year dollar bonds after eight months.

Iraq is also reported to be preparing to sell domestic bonds to finance its budget deficit. This sale is the first since 2003.

In a nutshell, until a new rate hike decision by the Fed changes the climate, in the relaxed monetary climate, there is now an opportunity for emerging countries like Turkey to draw global funds – even if for just a short time.

In the event that there are no extraordinary political or geopolitical risk increases in Turkey, then this climate is likely to foster capital inflows and thus strengthen the lira.

However, it is not known how long this will last or what the final figures will be.

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