Op-Ed: Turkey’s economy grew by 8% in the third quarter of 2011, the world's fastest growth rate after China. At the same time, however, its trade deficit is ballooning. A hard landing awaits. When it arrives, Turkish policy makers must accept re
ISTANBUL -- Turkey's latest economic growth data may be robust, but it doesn't make me happy. I have said countless times that this unchecked rapid growth will cause problems further down the road. Even people who initially supported the breakneck growth rate are concerned by the latest figures. Finally, all are now openly discussing whether we will see negative growth in 2012.
It is clear that the economy will start to slow -- the only debate is how sharply. This is not just a domestic concern: international investors are also sounding the alarm bells and have stepped up their warnings, including a sharp piece in the Financial Times warning that Turkey could be in for a rough landing after its rapid growth.
When the economy starts to slow down, the rhetoric will be sure to heat up. Some commentators will no doubt blame it on a conspiracy, on foreign investors who can't stomach Turkey's success and are trying to destroy us.
In this economy, somehow the government is never criticized for its errors. Instead, voices abroad pointing out faulty economic decisions are declared the culprits. This has always been the case, but the trend is more pronounced now. But in an economy as dependent as ours on foreign markets, and with such a high current accounts deficit - in other words, an economy dependent on foreign investors' decisions - if you make mistakes, a rough landing is inevitable. That's why we must not forget who the real culprits are: the policymakers who failed to take preventive measures.
One government minister has said that Turkey will break its own exports record this year. This is true. But why don't we add that imports have also reached a historic record? Why don't we also say that the current account deficit - i.e. foreign currency balances - are also at an all-time high?
Without these additional facts, it looks as though domestic production is fueling exports, or that growth is internally driven. But when exports rise, imports are also rising exponentially, showing that the added created value of exports is actually rather low.
With strong domestic demand, you get high growth rates, but your current account deficit also rises. This means that you are pushing a growth policy based on hot money. It is as if nobody knows that when overseas capital inflows decrease, we won't be able to maintain growth.
This is why we have started to discuss how rough the landing of 2012 will be. And, if it is indeed a rough landing, the culprits are not foreigners, but the people who govern us.
Banks and political meddling
A healthy banking system, created after the financial crisis of 2001, is the most important factor in Turkey's rapid growth, and the reason that the economy hasn't been derailed despite the current account deficit.
But lately, as if global economic woes were not enough, the banking sector has also come under pressure – and from the Turkish government. Just look at statements made by the ruling AKP party deputy general head Nurettin Canikli. The AKP has started a campaign against Is Bankasi – Turkey's largest bank -- citing the fact that the opposition People's Republican Party (CHP) is a shareholder in the bank. The bank's general manager Adnan Bali was forced to speak out. "This bank belongs to this country, everyone has to look after it," he said.
If the government starts interfering in the economy in this manner, particularly towards banks, isn't that a bit like kicking itself in the pants? It is for this reason, to protect banks from becoming embroiled in politically motivated operations, that the banking regulatory body BDDK was given serious powers to prevent attacks against banks in the media.
For instance, for years I have avoided giving names when writing about banking, even when sometimes it was needed. I fear the reaction of the BDDK. And yet, they have done nothing in response to the campaign against Is Bankasi. Why is that? If the roles were reversed, and these articles were being published in a newspaper that wasn't pro-government, and it was the opposition speaking out, would the BDDK have remained as quiet? Don't they know that the biggest asset is not political partisanship, but having a reputation for being truthful and principled?
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Photo - jon smith