Fate of mega airport depends on growth

İstanbul will, hopefully, have a new airport in 2019, replacing the current Atatürk Airport that has reached the limits of its capacity. But do not worry. The new airport will have enough space, maybe more than necessary. Indeed, for its opening an annual capacity of 90 million passengers is projected, whereas İstanbul Atatürk Airport handled 45 million passengers last year. Then, there are plans to increase the capacity of the new airport to 120 million and even 150 million in a third stage. If these ambitious plans are realized, the new airport will probably be the biggest in the world.
Istanbul mega airport: Too big or not? This very ambitious project raised, as expected, a heated debate in the Turkish media regarding environmental concerns and profitability, all the more after Prime Minister Recep Tayyip Erdoğan, a great lover of mega projects, presented it as one of the most important endeavors of Turkey under the Justice and Development Party (AK Party) rule in terms of capacity and tender price. Indeed, a few weeks ago the new airport was awarded to a consortium of Turkish firms under a build-operate-transfer (BOT) system for 22 billion euros to be paid to the Turkish Treasury over 25 years. On Friday, the Bahçeşehir University Center for Economic and Social Research (Betam) published a research brief which I co-authored which might help in seeing things more clearly in this hot debate. Betam's research tries to answer two questions: Are the projected capacities realistic and could the new airport be profitable, taking into consideration the high tender price? Before going through the airport mathematics, let me give you Betam's answers: If the Turkish economy grows around its potential in the next 25 years, the projected capacities do not seem to be the product of a megalomaniac mindset. But if growth rates lag a little behind potential growth, even the 120 million passengers target is seen as too optimistic. The answer to the second question is, in fact, included in the first answer. If the passenger forecasts are not realized, the estimated operating profits will be far from compensating the rent to be paid to the Treasury together with the installments of the bank loan. Thus, the critical point is economic growth. Betam forecasted passenger increases based on the results of a slowdown taking into consideration population increase, the rate of economic growth and ticket prices, the first two parameters being the most influential. Population increase is easy to forecast. To estimate the growth rate Betam considered two growth scenarios. In the first one, it set growth at 5 percent for the next seven years, which is the admitted potential growth rate for the Turkish economy, then 4 percent until 2030, and, finally, 2 percent up until 2043. In the second scenario, should Turkey be unable to implement the necessary reforms in order to secure its potential economic growth, the growth rates used in the forecasts are 4 percent, 3 percent and 1.5 percent, respectively. In the first scenario, a 90 million capacity in the first stage seems more than reasonable and 150 million passengers would be achieved around 2030. However, if the Turkish economy continues to be trapped in a low growth regime -- and it seems to be the case actually -- the slightly lower growth rates would have a decisively adverse impact on the number of passengers. Indeed, in the second scenario the forecasted number of passengers hardly reaches 70 million in 2019 and a capacity of 120 million would be fully utilized only in the 2040s. Let me underline once again that the necessity of a mega airport for Istanbul depends crucially on the future growth performance of the Turkish economy. The profitability issue is, quite logically, linked to the number of passengers and flights, given the agreed service prices in the tender. Taking as benchmarks the financial information of Hartsfield-Jackson Atlanta International Airport, the busiest in the US with about 90 million passengers, as well as those of the Atatürk and Sabiha Gökçen airports, Betam's estimates show that in the optimistic scenario, cumulative losses appear until 2030 because of rent and loan installments. But these losses are largely compensated for after this thanks to large profits. Nevertheless, in the second scenario, the profitability of the mega airport might be very problematic unless the consortium succeeds in raising enough non-operational revenue from real estate developments in the extensive area (7,400 hectares) provided to the new airport.

Durgunluk tehlikesi

TCMB döviz kurunu tutabilecek mi?

Baştan söyleyeyim, niyetim yangına körükle gitmek değil. Ama ne yazık ki uç gösteren yangını da görmezlikten gelemeyiz. Geçen hafta “Eğer yabancı sermaye akımlarına tahdit konmayacaksa spekülatif hareketlerle baş etmeyi bileceksiniz... Komplo iddiaları ilerde TCMB’yi köşeye sıkıştırabilir. Faizleri arttırması gerektiğinde ne yapacak? Komplonun bir parçası olmamak için doğru politikayı uygulamaktan imtina mı edecek?” diye sormuştum. Çok geçmedi, FED’in ilerde parayı sıkılaştıracağına dair sinyaller vermesi üzerine pek çok ekonomi yoğun sermaye çıkışlarına maruz kaldı. Doğal olarak ve belki de fazlasıyla, Türkiye ekonomisi de bu çıkışlardan nasibini aldı. Döviz sepeti hızla değer kaybederek 2.20’yi, gösterge faiz de yüzde 8’i aştı. 

Oysa TCMB’nin faiz koridorunun üst sınırı yüzde 6,5’te duruyor. Makul ve bağımsız pek çok iktisatçı TCMB’nin faiz silahını çekmek zorunda olduğunu savunuyor. Bir yandan Rezerv Opsiyon Mekanizması yoluyla bankalar zorunlu karşılık için yatırdıkları dövizi çekiyor, diğer yandan TCMB döviz satıyor. Bu araçlarla döviz talebinin kalıcı olarak sakinleşeceği şüpheli. Önümüzdeki aylarda FED’in sıkılaştırma planlarını daha belirgin hale getirmesi durumunda sermaye çıkışları devam eder. O zaman ne olur? Yatırımcılar TCMB’nin rezervlerinin yetersiz olduğunu ve bu nedenle kurun yükselmeye devam edeceğini düşünmeye başlarlar ve sermaye çıkışları daha da hızlanır. İktisatçılar buna ‘kendini doğrulayan kehanet’ diyor. 

‘Faiz lobisi’ TCMB’yi esir aldı 

Böyle bir gidişatı engellemenin yegâne yolu Merkez Bankası’nın en önemli silahı olan faiz politikasında elinin serbest olmasıdır. Oysa ‘Faiz lobisi’ heyulası TCMB’yi esir almış durumda. Ne zamandır Başbakan ve kimi bakanlar düşük faizi adeta bir saplantı haline getirmiş durumdalar. Salt iç talep artışlarıyla büyüyebilen, yeterince iç tasarruf üretemediğinden yüksek cari açık veren, üstelik bu açığı büyük ölçüde sıcak para tabir edilen portföy yatırımları ve dış banka kredileri ile finanse edebilen bir ekonomi, uluslararası faizler yükselme eğilimine girdiğinde ve kur riski arttığında negatif reel faizi sürdüremez. 

Düne kadar düşük büyümeyi tartışıyorduk. İç talepte canlanma belirginleşiyor, büyüme yüzde 2’den yüzde 3’ün üzerine çıkmış görünüyordu. Makul bir kur düzeltmesi gerçekleşmişti. Enflasyon kontrol altındaydı. Ama artık bu noktada değiliz. Faiz arttırmadan döviz sepetinin mevcut düzeyinde (2,25 civarı) tutunabileceğini kabul etsek dahi, TCMB’nin enflasyon tahmini artık boşluktadır. TCMB hedeften uzaklaşan enflasyona tahammül edebilir mi? Enflasyonla mücadele konusunda inandırıcılığını kaybetmek istemiyorsa faiz arttırarak tepki vermesi gerekir. Bu tepkiyi mevcut ortamda verebilir mi? Umarım verir. 

Merkez Bankası faizleri arttırdığında canlanmakta olan iç talep kısa süre için duraklayabilir ama en azından büyümenin geleceği kurtarılmış olur. Elbette tatmin edici bir büyüme için çok daha fazlası gerekiyor. Barış sürecini ve demokratikleşmeyi tamamlamak, aynı zamanda da ertelenen ekonomik reformları yapmak farz. 

Peki, halen siyasal baskı altında olduğunu düşündüğüm TCMB gereken tepkiyi zamanında veremezse ne olur? Kur daha da yükselir, enflasyon hedefinden iyice uzaklaşır. Bu durumda ekonomi bugünkünden daha şiddetli bir ‘ani duruş’ (sudden stop) şokuna maruz kalır. Döviz açığı olan firmaların bilançoları bozulur, yatırımlarını kısmak zorunda kalırlar. Yerli bankalar krediyi kısmaya, yabancı bankalar da verdikleri kredileri yenilememeye başlarlar. Bozulan ortam, özel tüketimi de olumsuz etkiler. Tek teselli cari açığın daralması olur. Benden söylemesi...

The ‘sudden stop' threat

While I asked in this column on Saturday if the “Turkish economy is on the eve of a recession,” Professor Daron Acemoğlu from MIT was speaking the same day at Bilgi University about the risk of a “sudden stop” in the Turkish economy.
Turkish Central Bank became prisoner of the intereset rate lobby discourse  A hot debate is open. Let's first briefly explain the “sudden stop” for readers unfamiliar with the concept. In an economy where capital movements are free, short-term investments and capital inflows can change direction and leave the recipient country very quickly from time to time. The reversal of capital flows depends basically on an eventual risk of capital losses due to a decrease in asset prices. When this eventuality is perceived by the majority of investors, they simply take home their money. A number of factors can cause such behavior, and there is no need to invent an “interest lobby” to explain the sudden stop phenomenon. For a foreign investor who exchanged some amount of dollars into Turkish lira and invested it in Turkish-lira denominated assets, the value of the Turkish lira becomes a decisive parameter. If the majority of investors start expecting an imminent depreciation of the local currency, it is quite rational for them to sell their assets before this depreciation occurs. And when sales begin, asset prices start decreasing. Economists call this a “self-fulfilling prophecy.” Of course the risks and consequences of the sudden stop vary from one economy to another. The lower local interest rates are compared with the expected interest rates of safe assets like American Treasury bonds or Eurobonds, the higher the risk of a sudden stop. The larger the current account deficit in an economy and the more over-financed it is by short-term capital flows, the more likely this economy is to face a sudden stop. And last but not least, the weaker investors' confidence in economic management, the more they are inclined to perceive increasing risks of a sudden stop. Here, we are coming back to the self-fulfilling prophecy. Two out of these three conditions have been present in the Turkish economy since one month ago, roughly. Turkish Lira had appreciated more than what the Central Bank was ready to accept for macroprudential reasons. So it lowered interest rates, aiming to provoke a controlled depreciation of the Turkish lira. The interest rates went so low that expected real interest rates became negative, launching a debate about their sustainability. This debate is fully justified because Turkey still carries one of the highest current account deficits in the world. Moreover, this deficit is mostly financed by short-term capital flows. In this context came Bernanke's statement regarding an eventual tightening of the FED's monetary policy in the future if the US economy continues its recovery. Then US Treasury bonds' interest rates increased slightly. So, most of the ingredients for the sudden stop that started last week were already present in the Turkish economy. As for the investor confidence issue, we can't yet say that it has definitely started weakening. Nevertheless, we should admit that our governors have done all they can in this respect. Accusing an obscure interest lobby of provoking a sudden stop and a rapid deprecation of the Turkish lira as well as a rapid increase of market interest rates is certainly not the right approach to calm down already nervous investors. This is because it reveals an absolutely wrong reading of the events that are happening and at the same time increases worries about the government's ability to properly manage an open market economy suffering from some fragilities. What is most dangerous, I think, in this approach is that it takes the Central Bank's monetary policy prisoner. At the moment, the Central Bank prefers to use its hard currency reserves to end the sudden stop, hoping that outside and inside Turkey there will soon be enough good news to reverse current adverse expectations. However, it may be obliged to use its interest rate weapon, since its reserves are rather limited. If this need appears, it will be not easy for the Turkish Central Bank's management, albeit independent by law, to pull out the interest rate weapon since the government firmly condemns high interest rates as the mother of all badness. To end this article, let me recall the infamous battle former Prime Minister Tansu Çiller waged against market interest rates in November 1993, triggering a full-fledged financial crisis. The Turkish economy today is far more structurally strong than it was in the 1990s and a financial crisis is not likely. But a recession is possible.

Is the Turkish economy on the eve of a recession?

Global and local shockwaves are continuing to shake the Turkish economy. A second wave hurt the Bourse İstanbul, taking it down sharply while market interest rates continued their climb. Within the past month, the Turkish lira has lost more than 8 percent of its value against the foreign exchange basket despite many interventions by the Central Bank of Turkey through the selling of hard currency. The two-year benchmark bond yield rose over 8 percent on Friday; it was around 5 percent only a few weeks ago.
Dangerous tension for Turkey Admittedly, the shock is not peculiar to Turkey. As assessed by Bloomberg, “the game seems to be over” for the emerging markets amid the changing stance of the Fed regarding its future monetary policy. This changing stance was part of the game. If the US economy stays on the path to recovery, the Fed will be stopping its cheap, rampant liquidity policy. These expectations cause, quite naturally, capital outflows from emerging economies, particularly from those considered most fragile. There is no surprise in this new state of affairs. However, the Turkish economy has felt the effects more than others. Why? I think there are two main reasons: The first is the pre-existing weaknesses of the Turkish economy. Readers are certainly aware of these weaknesses, but let's recall them briefly. The current account deficit (CAD) to gross domestic product (GDP) rate is 6 percent, which is still high and, moreover, is increasing because of a recent revival in domestic demand along with sluggish exports and increasing imports. Inflation, at roughly 6.5 percent, is over its target of 5 percent and the GDP growth rate is below 4 percent. This state in which we find macroeconomics is already alarming and necessitates a different policy response than the current one. In this setting, the Justice and Development Party (AK Party) government very poorly managed the Gezi Park crisis. Prime Minister Recep Tayyip Erdoğan preferred to accuse the “interest rate lobby” as well as his Western allies of being responsible for the Gezi Park protests. As I have already put forth in previous articles, this irrational attitude causes worry among investors regarding the ability of AK Party to properly manage an open market economy in troubled times. This is, I believe, is the second reason why the Turkish economy has been affected more than others. When the first shockwave due to domestic tension struck a week ago, Central Bank of Turkey Governor Erdem Başçı stated his belief that the Gezi Park events are responsible for one-third of the market-related problems. Given fact that the AK Party responded harshly to European criticism over Gezi, thereby provoking a crisis in the harmonization process, the second shock certainly amplified the drift in the main macroeconomic indicators. This is not the first time that the Turkish economy has faced a sudden stop concerning capital flows. In these circumstances, the central bank would react by increasing interest rates to stop the bleeding and regain control over the rapid depreciation of the Turkish lira. This policy would bring about a new equilibrium of relatively lower but balanced growth and a competitive exchange rate. This time is different, for two reasons at least. The rebalancing operation had already failed and in order to increase economic growth, which had dropped to 2 percent, the central bank and the government were trying painfully to revive domestic demand through rather loose monetary policy. Expected real interest rates were falling and this was already a hotly debated issue. The external shock occurred at a time -- and this is the second reason -- when Turkey needed to keep investor confidence strong in terms of political and economic stability. What is happening now? Conspiracy theories and the tension with the EU undermined this confidence and the sword of Damocles is hanging over the central bank, which risks being accused of being part of the interest lobby if it reacts by increasing interest rates. The upper limit of the interest corridor has been lowered to 6.5 percent, the rate at which the central bank provides short-term loans to banks, whereas the bond yields now exceed 8 percent. So, the central bank is trying desperately to stop the devaluation of the Turkish lira by selling dollars. Obviously, the Turkish economy now seriously faces a risk of recession. President Abdullah Gül said recently that “building a reputation can take 10 years, but this reputation can be lost in 10 day.” The Central Bank of Turkey had painstakingly built a solid reputation over the past several years and now risks losing it if it does not quickly tighten its monetary policy. But, above all, the AK Party rulers must find a way to radically change their minds if they do not want to have an economic recession on their hands.

Gezi Parkı'nın ardından ekonomi

Merkez Bankası için zor günler

Gezi Park direnişi Türkiye tarihine geçecek kadar önemli bir olaydı. Pek çok yorumcunun iddia ettiği gibi tarihsel bir dönüm noktası olacak mı? Tam kestiremiyorum. Bu hükmü ileride tarih verecek. Ama sanırım şunu kabul edebiliriz: Gezi Parkı direnişi AK Parti’nin içsel açmazlarını açığa çıkardı, moral üstünlüğünü sarstı. Eğitimli, liberal yaşam tarzına duyarlı, eski Türkiye’nin siyasal ideolojilerine bağlılığı olmayan geniş bir kentsel kesim bu vesileyle siyasete girdi ve AK Parti’ye esastan çoğulcu olan Türkiye toplumunu muhafazakâr ve ahlakçı temeller üzerinde yeniden inşa etme tasavvurunun sınırlarını çizdi. 

AK Parti iktidarının bu sınırların farkında olduğundan kuşkuluyum. Uluslararası bir komployla karşı karşıya olduklarını savunmaya ve belki de gerçekten buna inanmaya devam ediyorlar. Bir yandan Avrupa Birliği ile üyelik müzakerelerine devam edeceksiniz, diğer yandan “Bu gidişattan endişeliyiz” diyen Avrupalı yöneticilere “Siz işinize bakın” diyeceksiniz. Bir yandan ‘faiz lobisini’ finansal piyasaları karıştırmakla suçlayacaksınız, diğer yandan Gezi Parkı tansiyonu düşer düşmez yükselen borsayı, çıktığı gibi inen kuru ve faizleri görmezden geleceksiniz. Eğer müttefikimiz olduğunu kabul ettiğiniz Batılı ülkeler Türkiye’yi paçalarından aşağıya çekme peşinde ise Batı ile ilişkilerimizi gözden geçirmemiz gerekmez mi? 

Büyüme alarm veriyor 

AK Parti’nin çelişkileri ekonominin geleceği açısından haklı endişelerin doğmasına yol açıyor. Uzun süredir Türkiye ekonomisi düşük büyüme sorunu ile karşı karşıya; Başbakan’ın ve pek çok AK Parti yöneticisinin bu sorunun farkında olduğundan şüpheliyim. İşgücü piyasası reformları iptal edildi ya da ertelendi. Radikal bir vergi reformu beklentisi boş çıktı. Meclis’e sevk edilen taslak, Milli Gelir içindeki payı yüzde 5’ten ibaret olan gelir vergisi payını (AB ortalaması yüzde 10) dikkate değer ölçüde arttırma kabiliyetinden çok uzak. Yerli-yabancı tahminciler 2013 büyümesini yüzde 4’ün altında görüyor. Bu büyüme işsizlik açısından yetersiz, cari açık açısından dengesiz, verimlilik ve rekabet gücü açısından ise kalitesiz. Ayrıntılara önümüzdeki haftalarda gireriz. 

Büyüme yeniden iç talep odaklı hale geldi. Cari açık artış eğiliminde ve büyük ölçüde sıcak parayla ve dış finansmanla dönüyor. Türkiye ekonomisi iç talebe dayalı olarak büyüyecekse, ki aksi yönde şimdilik hiçbir emare yok, daha fazla doğrudan yabancı yatırıma ve finans piyasalarının güvenine ihtiyacı var. Bu ihtiyaç herhalde faiz lobisi söylemiyle ve doğrudan yabancı sermaye yatırımlarının yüzde 80’inini sağlayan AB’ye posta koyarak karşılanamaz. Gir çık yapan spekülatörler her zaman vardı, var olmaya da devam edecekler. Eğer yabancı sermaye akımlarına tahdit konmayacaksa spekülatif hareketlerle baş etmeyi bileceksiniz. TCMB bu yönde bir hayli mesafe kaydetmişti. Komplo iddiaları ileride onu da köşeye sıkıştırabilir. Faizleri arttırması gerektiğinde ne yapacak? Komplonun bir parçası olmamak için doğru politikayı uygulamaktan imtina mı edecek? 

Bu arada siyasal reformlarda beklemede. Oysa hayati öneme sahip barış sürecinin devamı bu reformlara bağlı. AK Parti’nin başkanlık sistemi üzerindeki ısrarı zaman kaybettirmeye devam ediyor. Daha önce de yazdım. Bu ısrar, siyaseti dengesizleştirerek yönetim istikrarını da tehdit ediyor. AK Parti iktidarının önceliklerini gözden geçirmesi ve toplumsal gerginliği arttıran buyurgan söylem ile ahlakçı tasavvurlardan vazgeçmesi şart. Aksi takdirde zaten düşük giden büyüme daha da zayıflayabilir. Ne demiş atalarımız? Kim ne ekerse onu biçer.

AK Party and the West

A desirable solution will likely be reached in Turkey's Gezi Park problem. The latest developments are very critical. In the last few days the Justice and Development Party (AK Party) government's new approach has become more clear as seen through meetings held by Prime Minister Recep Tayyip Erdoğan with various groups representing more or less the Gezi Park protestors. The government will wait for the decision of the tribunal handling the Gezi Park redevelopment issue.
If the decision is against the reconstruction of the old casern, the Gezi Park file will be closed. If not, in other words if the tribunal gives a green light to the reconstruction project, the citizens of İstanbul will decide through “deliberative polling”. I agree with this solution along with many other liberal intellectuals. Suspected for conspiracy Anyway, Gezi Park's event will be over soon in some way or another and I hope that this will be a peaceful way. Now, it is time to think about the consequences of the protests and lessons we learn here. I am asking myself some basic questions but I should confess, I have no definitive answers. Why didn't the AK party adopt from the beginning the compromise defined above? In fact, there were some voices in Ankara that were inclined to a compromise. Statements of President Abdullah Gül and of Deputy Prime Minister Bülent Arınç are the main examples of these sound voices. But Mr. Erdoğan and his close circle preferred the escalation. Why? Probably they were unable to identify correctly the reasons of the Gezi Park upheaval, which was, in fact, a spontaneous movement of an urban young generation that is well-educated, secular and has no having particular political associations. Thousands belonging to this generation have been activated not only to save a park but also to express their anger against the brutality of the police, against the attempts of social engineering and against the authoritarian and arrogant discourse of Mr. Erdoğan. Despite the compromising approach of the AK Party government and the calming down of the prime minister, the insistence on the misreading continues as it is proved by the ongoing shadow boxing: AK Party rulers are still claiming that obscure forces and the ‘interest rate lobby' that is willing to destabilize Turkey to damage its economic development are the main instigators of the Gezi Park protests. Who are these obscure forces? The AK Party avoids identifying them. Nevertheless, since the Western media and recently the European Parliament, which adopted a very critical resolution about the AK Party's governing style, are considered the main actors of the organized conspiracy and since they are criticized by the usual arrogant discourse, one should admit that the obscure forces must be searched for in Western countries. Might some Western governments, like for example the US and Germany, be considered part of this conspiracy, since the Obama administration as well as Angela Merkel and Guido Westerwelle warned the AK Party government regarding the abusive use of force and to respect basic freedoms? Or is it question of some lobbies and media patrons linked to Zionist circles, as the press close to the AK Party stigmatized The Economist and Financial Times? Are there some speculative investment fund managers unhappy with the low interest rates, trying to push these rates up and damage the Turkish economy by this way? The list can be augmented. Sincerely, I believe that the conspiracy theory is so absurd, end even so schizophrenic that I will not try to prove its inexistence, but remark that I consider these “interventions” as anxious attempts to prevent Turkey's drift which will destabilize not only it self but at the same time the already troubled Middle East. So, it would be better to focus on the consequences of this madness. The basic fragility of the Turkish economy is well known; it has a high current account deficit, roughly 6 percent of its gross domestic product (GDP), while this deficit is mostly financed by hot money and foreign loans. On the other hand, decent economic growth can only be led by domestic demand, at least in the foreseeable future. This means that Turkey crucially needs to increase foreign direct investment (FDI) and the only reliable source is Europe which provide 80 percent of it. It is obvious that the AK Party should understand that jeopardizing the EU harmonization process is the main threat to the Turkish economy and to AK Party rule so far. And as I noted Tuesday in this column, a sound management of an open market economy cannot be based on fears of conspiracies but on the rational economic policies that respect the rules of the open market economy and its constraints.

Ak Parti köşeye sıkıştı

Ak Parti çıkmazda

Normal bir zaman olsaydı dün sabah açıklanan 2013 1. Çeyrek büyümesini yazacak ve özetle şunları söyleyecektim: Beklenenden yüksek gelen yıllık büyüme oranı yüzde 3’e yükseldi. Çeyrekten çeyreğe büyüme ise yüzde 1,6. İç talebin durgunlaşmaya başladığı 2011’in ikinci yarısından itibaren en yüksek büyüme hızı. Büyüme esas olarak iç tüketimdeki canlanmanın eseri. Özel yatırımlar hâlâ zayıf. Kamu bayağı katkı yapmış; özellikle yatırımlar üzerinden. Net ihracat katkısı ise beklediğim gibi negatif. Cari açıkta az da olsa bir artış var. Yani Türkiye ekonomisi normalleşiyor! 

Ama zamanlar normal değil. Gezi Parkı gençlerinin başlattığı kitlesel kalkışma siyasal gündeme damgasını vurdu. Bu eylemin Türkiye’nin tarihinde hiç yaşamadığı liberal demokrasiye geçişin işaret fişeği olduğuna dair yorumlar yapılıyor. AK Parti, toplumu muhafazakârlaştırma çabası ile esasen çoğulcu bir ülke olan Türkiye’nin ihtiyaç duyduğu liberal demokrasinin gerekleri arasına sıkışmış durumda. Kürt sorununun kalıcı olarak demokratik zemine oturması da liberal demokrasinin inşasına bağlı. 

Hayaletlerle boks 
Başbakan’ın Gezi Parkı kalkışmasını doğru okumaya çabalamak yerine komplo iddialarına sığınması, Ak Parti iktidarının bu sıkışmışlık halini kolay kolay aşamayacağını gösteriyor. Artık siyasal istikrar da ekonomik istikrar da risk altında. Günlerdir Fransızından Amerikalısına, Almanından Japonuna laf anlatmaya çalışıyorum. Hep aynı soru: “Gezi Parkı olayları ekonomiyi nasıl etkiler?” Evet Borsa çakıldı, faizler ve kur fırladı ancak bu yönde bir gelişme, içeride bizim Merkez Bankası dışarıda ise FED’in yaklaşımları nedeniyle zaten hesapta vardı. Bu ortamda bir miktar sermaye çıkışının olması makuldü. Ancak Gezi Parkı kalkışması bu çıkışı şiddetlendirdi çünkü yatırımcıların içine Ak Parti iktidarının Türkiye’nin temel sorunlarının farkında olmadığına dair kurt düşürdü. 

Güncel ekonomik sarsıntıdan meçhul bir ‘faiz lobisini’ sorumlu tutan, teşhis edilemeyen ‘karanlık güçlerin’ Türkiye’nin ekonomik güç olmasını engellemek için harekete geçtiğini savunan bir iktidarın, açık piyasa ekonomisini yönetme kabiliyetinin sorgulanması doğaldır. İktisatçı meslektaşlarım kendi mecralarında faiz lobisi ve komplo saçmalığına yeterince değindiler. Onlara katılıyorum. Türkiye ekonomisinin karşı karşıya olduğu sorunun esasına bakalım. 

Yeni yol haritası 
Bir taraftan demokratik reformlar diğer taraftan ekonomik reformlar yapılmadıkça istikrar tehlikede demektir. Ekonomik reformlardan ümit kesilmiş durumda. İşgücü piyasası reformları çoktan rafa kaldırıldı. Gezi Parkı kalkışması nedeniyle tartışılamayan vergi reformunun içi büyük ölçüde boş. Vergi kaçağını köklü bir şekilde azaltarak elde edilecek vergi gelirlerini daha dengeli bir büyüme için kullanmak bir başka bahara kaldı. Demokratik reformlar ise adeta Godot’yu bekliyor. Abdullah Öcalan son İmralı görüşmesinde “Ben yapacağımı yaptım şimdi sıra hükümette” demiş. Haklı. Ak Parti ise oralı değil. Ceza yasasında, seçim yasasında, siyasal partiler yasasında anayasa değişikliği gerektirmeyen değişiklikler için iktidar neyi bekliyor? 

Bana öyle geliyor ki, Ak Parti’nin hâkim kanadı barış sürecini başkanlık rejimi için kullanmayı tasarlamıştı. Bu strateji zaten can çekişiyordu. Taksim Parkı’nın korunmasının sınırlarını çoktan aşan ve iktidarın otoriter ahlakçı dayatmasına itiraza dönüşen Gezi Parkı kalkışması bu stratejiyi tümüyle çökertti. Şimdi Ak Parti’nin yeni bir yol haritasına ihtiyacı var. Aksi takdirde siyaset giderek istikrarlaşacak. Gezi Parkı’nın ekonomiye etkisini o zaman görürsünüz.

Misperceptions can be very costly

Saturday I wrote in this column that the Gezi Park protests could be a turning point for Justice and Development Party (AK Party) rule as well as for economic stability if the AK Party and particularly the prime minister, refuses to correctly interpret the “dignity” revolt of the youth of Istanbul who are politically unengaged but protective of their individual liberties and style of life.
Prime Minister Erdoğan accusing "conspirators" I am afraid that we will all soon be facing the harmful consequences of this refusal. Indeed, Prime Minister Recep Tayyip Erdoğan's speech shows that he perceives a wide conspiracy against him, including mysterious local and foreign forces and even includes the infamous “interest rate lobby.” He believes that all those who do not want Turkey to become a powerful nation and play its rightful role in the region -- and even on the world stage – are trying to exploit the sincere and candid protest of young “ecologists” in order to destabilize Turkey. Erdoğan demands that the protests be put to an end and invites these “sincere ecologists” to discuss environmental problems with him. Is this a joke or naïveté? I will let you to decide. At the moment, all the young foreigners who have been caught by the police during clashes have been revealed to be Erasmus students! This does not prove, off course, that “mysterious forces” have been activated. I am sure that there are many who will try to profit from the Gezi Park protests with bloody provocations. That said, the duty of the AK Party government is certainly not to provide grist for the mill of these “mysterious forces,” but to try to put an end to the occupation of Gezi Park through a sincere dialogue and compromise with the young protestors. A remarkable sign in this direction came from the Mayor of Istanbul, Kadir Topbaş when he said last week that the old barracks to be restored will be neither a mall nor a hotel and residence, but a museum. Gezi Park will be partly preserved and an addition will be made to Maçka Park, nearby. This could be a starting point for a compromise. However, the AK Party does not seem to be on the same wavelength, as proven in the prime minister's speeches in Adana and Mersin. We do not know yet how the Gezi Park protest will be ended. But even if the Gezi Park problem is solved peacefully, the essence of the problem will remain. That is, the AK Party's flawed conception of democracy as well as its misperception of the exchange between politics and the economy. Its conception of democracy has been recently made clear by the prominent counselor to the prime minister, Yalçın Akdoğan. I quote: “Solve all the problems of the 50 percent who did not vote for you, but don't solve the problems of those who voted for you. … They want you to build roads, construct dams but not open imam hatip schools!” This assessment is a crude summary of the AK party's understanding of economic development as well as of its social vision. That vision limits the well-being of Turkish society to increasing per capita income and to the improvement of public services while the society should at the same time become more conservative and moral. I was already inclined to interpret the recent faux pas of the AK Party and the arrogant discourse of the prime minister as political messages sent to his conservative electorate; Mr. Akdoğan's assessment confirmed my interpretation. Now, the upheaval in Gezi Park has reminded us of what is lacking in this unhealthy conception and vision: If economic development is not accompanied by expanding individual liberties and by respect for the various ways of thinking and beliefs that exist in Turkish society, political and social clashes will delay and jeopardize that economic development.   The misperception of the AK Party and particularly of Mr. Erdoğan, risks costing Turkey a lot. They should understand that the line between creating a morally sensitive society and its existing pluralism is very tiny. The 50 percent opposed to other 50 percent must absolutely be won over by instituting the liberal democracy that has been crucially lacking in Turkey since its foundation. The AK Party and Mr. Erdoğan should also understand that the good management of an open market economy cannot be based on fears of conspiracies but on intelligent economic policies that respect the rules of an open market economy and on the awareness of its constraints. Speculators can make juicy profits by investing in assets denominated in Turkish lira when the exchange rate and bond interest rates suddenly reach their peaks, but this is never a consequence of conspirators' plots but rather a consequence of clumsy policies. Let me remind you of the infamous interest rate battle of former Prime Minister Tansu Çiller that triggered the 1994 crisis.

Will Gezi Park protest be a turning point?

Many analysts of Turkish politics, including foreign ones, consider the Gezi Park events as a turning point in modern Turkish history. The essential question is, of course, a turning point of what? The answers vary, as can be expected. For some, the decline of Justice and Development Party (AK Party) rule has begun. According to them, the universal wearing down of power is now under way in Turkey. The examples of Margaret Thatcher, Tony Blair and even George Washington are widely used as reminders.
A new opposition emerged For others, the AK Party, and particularly its uncontestable leader, Prime Minister Recep Tayyip Erdoğan, has to reconsider its authoritarian style of governance and should prioritize the pending democratic reforms. If not, the risks of destabilization will increase. I rather agree with the second interpretation. It is true that the AK Party government is facing multiple challenges. Its stubbornness over a presidential system is blocking work on the drafting of a new constitution. The settlement process, aiming to end the armed conflict with the Kurdistan Workers' Party (PKK), is awaiting democratic reforms in order to continue on its path. The country's foreign policy seems more and more reluctant to face the unpleasant realities in the region. The Turkish economy is trapped in low and poor quality growth because of many constraints such as low productivity and a high current account deficit (CAD) combined with high inflation. However, these challenges, or unsolved problems, have not yet produced a disavowal of the “independent electors” voting for the AK Party because of the absence of a credible opposition that is more capable of tackling the challenges cited above. Voting intention surveys done before the Gezi Park events had unanimously indicated that the AK Party managed to retain slightly over 50 percent of support. Can the political outcomes of the Gezi Park protests distort the actual political equilibrium? I think that they can, particularly if Mr. Erdoğan continues with his arrogant as well as authoritarian style and if the AK Party continues to insist on the wrong priorities. Indeed, during the days preceding the Gezi Park protests, the AK Party government made a number of faux pas that were amplified by the prime minister's almost provocative discourse. Those missteps and hurtful injunctions of Mr. Erdoğan have largely been debated by Todays' Zaman columnists, and I do not want to repeat them. Nevertheless, I can say that those faux pas and Erdoğan's injunctions were all either political messages directed at the AK Party's conservative electorate or the expressions of narcissism of a power drunk on its own success. Let me remind you that the AK Party is a unique example in democratic regimes, at least according to my knowledge, which has won three successive elections, increasing its margin even more each time. The Gezi Park protests made clear that the AK Party's style of governance ended up causing a sentiment of “basta” among non-conservatives and, at the same time, the politically unengaged segments of Turkish society, pushing them into a political combat. Recently a very interesting survey done by Bilgi University academics of Gezi protesters fully confirmed the existing narrative about the characteristics of these protesters. Three thousand of them answered different questions regarding their motivations, political thinking and so on. They are quite young; 54 percent are aged between 19 and 30. Fifty-four percent have never participated in a mass demonstration before, while 70 percent have no political engagement. The protesters who identified with a political party were limited to just 8 percent. Close to 92 percent of protesters were in Taksim Square because they were offended by the prime minister's discourse and were angered by the violence perpetrated by the security forces. The share of those who defined themselves as “liberal” is 82 percent, while those who do not consider themselves “conservative” is 75 percent. Those who had voted for the AK Party were limited to 8 percent. The Gezi Park protesters are not in favor of a military coup to overthrow the government. The partisans of such a coup are limited to 9 percent, while overall in Turkey the percentage supporting the protests easily reaches 30 percent. And last but not least, 37 percent of protesters demanded a new opposition party. Those figures reveal that we are, indeed, facing a new kind of opposition. The AK Party leaders used to think that as long as the economy grows, macroeconomic stability is secured, poverty is diminished and impressive mega projects are on the agenda, the business community would interfere only in economic affairs and that the majority of citizens can be satisfied and might even admire a benevolent dictator. If the AK Party correctly interprets the message of Gezi Park and understands that democracy is also a regime of liberties and respecting others' thinking, it will be able to remain in power for a while.

Anlamak mümkün değil

Demokrasi dersi

Türkiye’nin son birkaç gün içinde geldiği nokta akıllara durgunluk veriyor. Taksim Gezi Parkı’nın yok edilerek yerine dikkate değer bir mimari özelliği dahi olmayan eski bir kışlanın yapılarak İstanbul’un kalbinin taş bloklarla boğulmasına karşı çıkan vatandaşların sabahın köründe polis şiddetine maruz kalmaları büyük bir protesto hareketini tetikledi. Başbakan Yardımcısı ve Başbakan Vekili Bülent Arınç’ın dün Köşk’ten çıktıktan sonra yaptığı açıklamada da kabul ettiği gibi, polis gereksiz aşırı şiddet kullandı. Bu akıl dışı saldırıya kimin karar verdiği halen belli değil. Buna karşılık AK Parti iktidarının, muhalefetin bugüne dek başaramadığını başararak karşısında geniş bir sivil koalisyon oluşturduğu açık. 

‘Gezi Parkı protestosu’ olayının nihai sorumluluğu hükümetindir. Ancak olayların bu noktaya gelmesinde Sayın Başbakan’ın başkanlık inadından tutun, Topçu Kışlası projesini şahsileştirmesine ve en önemlisi kibirli ve kışkırtıcı üslubuna kadar pek çok etkenin rol oynadığı konusunda geniş bir görüş birliği var. Başbakan bir süredir odaklanması gereken barış süreci ve onun ayrılmaz parçası olan demokratik reformlara odaklanmayı bırakmış, gerilimi tırmandırmakla meşguldü. Alkol satışına sınırlamalar getiren yasayla ilgili tartışmayı tamamen endazesinden çıkarmak, 3. köprüye Yavuz Sultan Selim ismini vererek, amacı bu olmasa da, Alevi yurttaşları kışkırtmak gibi çıkışlarla katı siyasal pozisyonları olmayan milyonlarca bağımsız seçmeni kızdırmayı başardı Sayın Erdoğan. 

Güven kaybı 
Ancak gelişmeler toplumsal düzeyle sınırlı kalmadı. Pazartesi günü borsa endeksi rekor düzeyde (yüzde 10) düştü. Yüzde 5’e gerilemiş olan faizler yüzde 6,5’e fırladı. Merkez Bankası’nın gevşettiği faizlerin bir miktar sermaye çıkışına neden olması bekleniyor, hatta Türk Lirası’nın bir miktar değer kaybetmesi için arzu bile ediliyordu. Buna karşılık piyasaların verdiği aşırı tepki, olsa olsa yatırımcıların AK Parti hükümetinin ülkeyi iyi yönetme kabiliyetinden şüphe duymaya başlamaları ile açıklanabilir. Oysa AK Parti iktidarının ekonomideki en önemli kozu, ekonomik aktörlerin güvenini kazanmış olmasıydı. 

Şimdi Başbakan bu güveni sarsmak için adeta çabalıyor. Benim aklımın ermediği nokta burası. Bir iktisatçı olarak Başbakan’ın itici üslubunun ardında akılcı bir gerekçe arıyorum ama bulamıyorum. Başbakan muhafazakâr çıkışlarla İslamcı tabanını muhafaza mı etmek istiyor? Bu bana pek akılcı gözükmüyor, çünkü diğer yandan muhalefete güvenmeyen ve AK Parti’nin şimdilik en iyi alternatif olduğunu düşünen bağımsız seçmenlerini uzaklaştırma ihtimalini gündeme getiriyor. Pek çok AK Partilinin bu riskin farkında olduğunu biliyorum. 
Barış süreci ya da ekonomi kötü gidiyor da bu nedenle mi Başbakan gündem değiştirmek istiyor desek o da değil. Barış süreci şimdilik sorunsuz gidiyor ve ilerlemek için AK Parti’nin ceza yasası, seçim sistemi, siyasal partiler yasası gibi demokratik adımları gündeme getirmesini bekliyor. Ama ne yazık ki Başbakan’ın çıkışları barış sürecini de tehdit etmeye başladı. Bir yandan âkil adamlarla sürece toplumsal desteği arttırmaya çalışırken diğer taraftan bu desteği dağıtan bir siyaset izliyor Sayın Başbakan. Ekonomide de durum çok farklı değil. Gerçi ekonomik gidişat, Başbakan’ın sandığı kadar parlak değil ama büyük bir sorun da görünmüyor, en azından orta vadede... Oysa Sayın Başbakan yatırımcıları da endişelendirmeyi başardı. Beklentiler bozulmaya başlarsa seçimlerin arifesinde durup dururken küçük çaplı bir kriz bile yaşanabilir. 

Peki, Başbakan ne yapmaya çalışıyor? Anlamakta güçlük çekiyorum. Olay iktisadın çerçevesini ve siyasal akılcılığı aşmış görünüyor.

A tax reform of calculated timidity

Since I started writing for Today's Zaman almost two years ago, I have complained about the Justice and Development Party (AK Party) government's lack of appetite for economic reform. Many radical reforms that took place under the Medium-term Economic Program (OVP) like severance pay, higher education and tax reform have either been pulled back from the agenda at the last moment, as in the case of the severance pay reform, or emptied of substance as in the case of the higher education reform.
With regards to the tax reform, the last OVP defined the goals of the public income policy as follows: Encourage employment and investments, increase domestic savings, reduce regional disparities, strengthen the competitiveness of the economy and fight the informal economy. Needless to say, these ambitious goals require comprehensive and radical changes in the existing tax system. Does the actual income tax draft law submitted for ministers' signatures reflect those kinds of changes? I regret to say “Partially, at best.” The basic problem of our tax system is well known. Finance Minister Mehmet Şimşek defined it once again during a press conference last week. The share of income and profit taxes in gross domestic product (GDP) stands at 10.4 percent in Europe but only 5.8 percent in Turkey. Mr. Şimşek added that the tax collection rate is far below the country's economic potential. Thus, the basic goal of a tax reform should be to fill this big gap by widening the tax base on the one hand and fighting tax evasion on the other. But at the same time, in order to encourage employment, to reduce regional disparities and fight the informal economy, tax rebates complying with these goals should be implemented. The loss of tax income due to these rebates could be compensated by the extra income received from an improvement in tax collection. The actual income tax draft law stands quite mild compared to the ambitious goals defined above. The measures foreseen can be summarized in three points: 1) Some exemptions for high salaries and multiple incomes, such as dignitaries as well as football players' incomes, have been either cancelled or reduced. The government expects an additional 126,000 income tax declarations from these measures. 2) Urban rents will be taxed more efficiently through measures canceling tax exemptions from the sales of houses and rentals. 3) Financial assets income will be taxed according to maturation periods; this measure aims to better capture speculative income. That is all; the Ministry of Finance did not give any estimates regarding the extra tax income that is expected from these measures. The absence of an impact analysis that should accompany economic laws is typical in Turkey. Let me point out that in the US there is a special institution, the Congressional Budget Office, which is in charge of analyzing tax law proposals and providing information to members of Congress before voting on the eventual impacts of measures on public finances, income distribution and so on. Here, the government and the economy bureaucracy are either supposed to know the eventual impacts but keep the information to themselves or, more plausibly, find out through trial and error. In any case, I think the extra income that can be expected will be far from fulfilling the tax collection gap between Turkey and Europe. I can assert this all the more since a serious measure to tackle tax evasion is crucially lacking in the draft. Mr. Şimşek made it clear: There will be no cross checks between expenditures and income declarations. This means that millions of tax evaders, particularly the richest ones, can continue to sleep in peace. In fact, any improvement in tax collection crucially depends on these cross checks complemented by severe penalties in cases of evasion. To tell you the truth, I am not surprised. A serious fight against tax evasion and more radical changes concerning tax exemptions would seriously hurt a number of people, some -- maybe even the majority -- of whom are AK Party voters. In the wake of the coming elections, one cannot expect radical tax reforms from any democratically elected government. Thus, let me conclude by saying “Better than nothing” and hope that this first step taken in the right direction will be followed by others when the elections are over.

What I am thinikg about Gezi Park protests

The article below has been published today by Todays' Zaman and signed by it editor in chief Bülent Keneş. As he expresses almost fully what I am thinking about Gezi Park Protests, I did not want to praphrase him.

The lessons to be learned from Gezi Park and two ways ahead
I have been in Bangkok since Friday to attend the Congress of the World Association of Newspapers and News Publishers (WAN-IFRA). But I have been intently following the news stories about the incidents in Taksim Square in İstanbul, back in Turkey. I have hardly had any sleep due to watching the developments in Turkey on Friday night, despite the four-hour difference between the time zones of İstanbul and Bangkok. I would like to share with you my thoughts about those worrying incidents.
I think there is no need to reiterate the legendary reforms and democratization moves the ruling party has implemented under extraordinarily hard and challenging conditions during their first two terms in office since 2002. However, having emerged as the sole indisputable power in the country after overcoming those challenges one by one thanks to its popular appeal, the same ruling party has failed to preserve the pace with which they implemented democratic reforms, and they have even occasionally backpedaled in some areas of democratization, rule of law and fundamental rights and freedoms although the conditions have been much more favorable in recent years. Although they have come to exert full control over the entire state apparatus, the ruling party has fallen prey to "power intoxication" due to the fact that there was no serious threat to their government from opposition parties, a significant portion of the media were bought or intimidated, and civil society was made subservient. Just as previous ruling parties had done in the past, the ruling party has started to act with extreme self-reliance, turning a deaf ear to well-meaning criticisms and even perceiving every critical word as antagonistic. A lack of serious competition from opposition parties has made the ruling party feel more and more self-confident, and with a tendency to grow more authoritarian, it has kicked off efforts to shape everyone's lives using state power. This deterioration in the ruling Justice and Development Party's (AKP) performance has created serious grievances and criticisms among diverse groups that formed the broad coalition that placed the AKP in power for three successive terms with increasing strength, and the government has started to cut off the channels of communication with the members of this coalition one by one. In a process similar to what the legendary Motherland Party (ANAVATAN) of the 1980s went through, the AKP has distanced itself from its supporters, but found itself surrounded by a gang of self-seekers and henchmen, who are set on building a virtual world around the ruling party. Unlike the usual reformist policies of its early years in office, the AKP has today come to be associated with giant construction projects in İstanbul and other cities that pay no regard to the environment in an effort to create benefits and revenues for certain self-seeking supporters. Broad social groups that have continued until recently to lend support to the AKP in the face of challenges from anti-democratic groups have started to believe that the ruling party is no longer a reformist or democratizing party, but has become a center of distribution of lucre. As it has continued to wave off criticism or advice with self-conceit, the process of making Turkey more transparent and demilitarized and shrinking the sphere the state controls in the lives of people has been reversed. The government's formulating and passing bills is a fait accompli, paying no respect to the sensitivities or expectations of society. Despite serious opposition from various segments of society, the self-conceited and controversial moves from the government such as the match-fixing bill, the project to rebuild Gezi Park, the reductions in the penalties for corruption in public procurements, the alcohol bill and many others have aggravated people's concerns about "single man rule" and the government's tendency to grow more "authoritarian." The accumulation of these concerns are the reasons behind the intensity of the reactions to the tree massacre in Gezi Park, the sole remaining green patch near Taksim Square, and to the project to build a shopping center in its place. Of course, even the motive to protect Gezi Park is alone sufficiently important to trigger social sensitivities. But the concerns for Gezi Park are insufficient to explain why the demonstrations spread to all cities across the country. On the other hand, the protests that started innocently and with sincere demands and with the participation of various social groups have gone off track through organized provocations and manipulations starting on Friday night, and I must note that this is attributable not only to some “deep” Ergenekon-like circles, but also to the errors made by the local and central administrations. By exhibiting indifference to people's demands, the government has given a kiss of life to the “deep” networks that had been forced to retreat thanks to years of hard-fought struggle. However, as Etyen Mahçupyan of the Zaman newspaper wrote on Sunday, a civilian initiative had been formed seeking to put an end to the Gezi Park project that is disliked by many inhabitants of İstanbul, and this initiative had been trying to get their voice heard by the authorities. "As if they had gone crazy because they have been captivated by their image of İstanbul, the government and local authorities are feigning ignorance about the demands and concerns of ordinary people. They not only avoid any contact with this initiative, but also refrain from paying even minimal respect to people," Mahçupyan wrote, and one cannot agree more with him. This approach by the government, i.e., paying no heed to social sensitivities and making decisions without consulting people on critical issues that closely concern the daily lives of people, seen in many cases in the past, was defined by Mahçupyan as the "eclipse of political reason." Mümtaz'er Türköne's description of the developments as "maladministration" is proper as well. In his latest article, Türköne says the following about what should be done now: "What should be done with Gezi Park is a local issue, isn't it? A local issue should be decided by the inhabitants of the locality. How many people lend support to the project of rebuilding the park? How can a local issue grow out of proportion and amass into an intricate, colossal revolt? Answer: Through maladministration. The incidents that wreaked havoc in Taksim are a perfect case of maladministration on the part of the government and local authorities. Decision makers must have exerted great efforts and made a series of grave errors in order to create such a big scandal out of the blue. This incident should not be ignored, but utilized in university textbooks as a perfect example of maladministration." I think the Gezi Park incidents represent a turning point in Turkish political life. Nothing will be the same from now on. And the government will have to stop acting like it has been doing during the last few years. Experiences of different countries facing similar situations indicate that administrations may opt for two approaches that are at stark contrast with each other. Thus, the government may respect the sensitivities of the general public and open up channels of communication with people and abandon its fait accompli and self-conceit. It will return to its former participatory, pluralistic and democratizing agenda. Or it will grow uneasy about the potential loss of political power and become more repressive, more censorious and more tyrannical. Everyone who wishes good things for this country hopes the government will choose the first option and learn a serious lesson from the incidents. Everyone -- except those who are rushing to gain commercial profits from the plundering of the beautiful and historic city of İstanbul -- would like to see that the "eclipse of political reason" is replaced with insightful administration and discernment, wouldn't they? Who wouldn't want "maladministration" stemming from "power intoxication" to be replaced with "good governance" practices that pay due respect to people? This should and will be discussed at length. But the first thing to do is save the ordinary people and groups who sincerely protest certain government actions from falling prey to the dark and ulterior purposes of shadowy forces. To this end, common sense must rule, and the protests, which I think have attained their targets, must be stopped. At this point, everyone should hearken to the call by President Abdullah Gül, who said: "In a democratic society, reactions should be allowed to be given in accordance with rules without provoking abuses. Similarly, authorities should exert serious efforts to lend an ear to differing opinions and concerns."

OECD forecasts low growth for Turkey

I hesitated between two subjects for today’s article. After a long period of deliberation, the draft of a new income tax law was finally submitted to Parliament on Wednesday.
On the same day, the Organization for Economic Cooperation and Development (OECD) published its new forecasts for the Turkish economy. I think it would be better to first talk about the OECD forecasts despite the importance of the tax reforms. This issue can wait until Tuesday, all the more so since we will be discussing it passionately in the coming weeks. Ali Babacan & Zafer Çağlayan: Prudence versus audacity According to the OECD’s “Turkey - Economic forecast summary (2013)”: “Following weak growth in 2012, as consumption and investment contracted and offset a surge in exports, the economy is now regaining momentum. Growth is projected to rise to above 3% in 2013 and, as the global recovery gathers strength, to pick up to 4½ per cent in 2014. Inflation and the current account deficit both remain above comfort levels, however.” I agree with the gist of this statement. But as usual, the devil is in details so, let’s look at them. The OECD’s growth forecast for Turkey this year is 3.1 percent. The first item to note is that the growth rate is well below the 4 percent targeted in the government’s Medium-term Economic Program (OVP). If growth remains at this level -- and I think that this is a rather realistic forecast -- the actual debate on monetary policy will become heated. The official growth target of 4 percent was already not well received by some ministers. The existence of contradictory approaches to monetary policy within the Justice and Development Party (AK Party) is not a state secret. Those partial to a push on the gas pedal continue to claim that interest rates are still high, despite the central bank’s recent reduction. It is worth reiterating that the expected real interest rates are currently in the negative zone, and this situation is currently considered by certain economists, including myself, as a potential risk for inflation and savings. I would like to note that there is dangerous confusion regarding the monetary policy. As is clearly expressed in the last Monetary Policy Committee (PPK) statement, lowering the interest rates is aimed at preventing further appreciation of the lira, which is already slightly overvalued, by discouraging excessive short-term capital inflows. At the same time, the central bank is trying to control credit expansion by squeezing the money supply in order to prevent an uncontrollable increase in domestic demand. This policy approach does not satisfy the proponents of acceleration. They demand an aggressive loosening of monetary policy. The low growth perspective is central to this opposition within the AK Party. If the debate has not yet turned into an open fight, this is because despite low growth, unemployment is not growing too fast. I have explained many times before in this column that this fortunate state of events is due to the high job creation capacity of growth prevalent in recent years. I do not think that this good fortune will continue in the near future. The OECD’s recent report forecasts an increase in the unemployment rate from 9 percent in 2012 to 9.4 percent in 2013. I believe that this forecast can be seen as a rather optimistic one. Another question mark regarding the OECD’s forecast is related to the current account deficit (CAD). The OECD thinks that exports of goods and services will increase by 4.9 percent and imports by 3.3 percent in 2013, causing a modest increase in the current account ratio to gross domestic product (GDP) that would reach 6.2 percent in 2013, up from 6 percent. I also consider this forecast rather optimistic. Yesterday, the Turkish Statistics Institute (TurkStat) published April’s foreign trade statistics. Seasonally adjusted exports had decreased by 1.6 percent compared to March, while imports had increased by 10.7 percent. Even if we exclude imports of gold, which showed a sudden jump in April, the growth rate of imports still remains high at 6.6 percent according to Bahçeşehir University’s Center for Economic and Social Research’s (BETAM) estimate. This is not a good sign for the CAD. As I already pointed out, the Turkish economy seems to be trapped in a low, unbalanced and poor quality growth regime. Even if GDP growth accelerates, as forecasted by the OECD, in 2014, this will be based mostly on domestic demand, further widening the current account deficit, as noted by the OECD. To sum up, it is quite probable that the GDP will remain below 4 percent in the future, causing a higher unemployment rate and CAD than expected. This state of affairs will be unacceptable for the AK Party government as the elections marathon will kick off soon.