Ali Babacan bilmecesi

Aslında bir değil iç içe geçen iki Babacan bilmecesi var. Birinci bilmece malum: Önümüzdeki hafta şekillenmesi beklenen yeni hükümette ekonomiden sorumlu Başbakan Yardımcısı Ali Babacan görevine devam edecek mi? İkincisi ise devam ederse ne yapabileceği.

Başbakan Yardımcısı Ali Babacan

Ülkeyi Çankaya’dan yönetmeye devam edeceği ayan beyan belli olan Cumhurbaşkanı Tayyip Erdoğan ekonominin mevcut gidişatından hiç memnun değil. Israrla talep ettiği başkanlık sisteminin kaderi önümüzdeki genel seçimlerde AKP’nin 330 milletvekilini aşmasına bağlı. Bunun için ise AKP’nin yüzde 50 üzerinde oy alması şart. Bu cepte keklik değil. Dahası, ekonomik büyüme zayıflama, işsizlik ise artış emareleri göstermeye başladı. Böyle devam ederse başkanlık sistemi tahayyülü uçup gidecek.

    Dolayısıyla Sayın Erdoğan bir an önce ekonominin canlandırılmasını istiyor. Bunu maliye politikası aracılığıyla yapamaz. Kamu harcamaları reel olarak artıyor, vergi hasılatı ise reel olarak geriliyor. Gevşeme sinyalleri veren mali disiplin bozulmadan bu yolla iç talebi canlandırmaya çalışmak riskli. Buna karşılık Merkez Bankası faizinin mevcut enflasyonun bir hayli altına çekilmesinin kredi faizlerini büyük ölçüde düşüreceğine, bu yolla yatırımların ve tüketimin canlanacağına inanıyor. Üstelik bu canlanmanın bedelsiz olacağına, çünkü negatif reel faizlerin ne döviz kuruna ne de enflasyona etki yapmayacağına inanıyor.

       Gerek Babacan’ın gerekse Merkez Bankası’nın para politikasında böylesine radikal ve son derece riskli bir değişime karşı oldukları malum. Bu nedenle Babacan’ın yeni kabinede yer almayacağını, Babacan’ın çekilmesiyle birlikte Merkez Bankası yönetiminin de fazla dayanamayacağını tahmin ediyorum. Ancak finans piyasasının benim gibi düşünmediği anlaşılıyor. Bıçak sırtında duran makroekonomik dengelerin hesapsız müdahalelerle altüst olma riskinin pek çok AKP’li tarafından görüldüğü söyleniyor. Son tahlilde Babacan’ın ekonominin patronluğunun devam edeceği beklentisi yaygın.

    Diyelim ki böyle oldu. Burada ikinci bilmeceye geliyoruz. Babacan Erdoğan’ı frenleyebilir mi? Diğer ifadeyle, mevcut “dengeli büyüme” stratejisinin gerektirdiği “temkinli” para politikası ile kurda istikrar politikası devam eder mi? Bu sorunun yanıtının önemli ipuçları S. Bilişim Danışmanlık’ın 22 Ağustos tarihli, “AK Parti Piyasa Dostu Olmadığı A. Babacan Siyaseten Etkisiz Eleman Olduğu Halde Yersiz Beklentiler” başlıklı 8 sayfalık Siyasal İstikrar İndeksi ara raporunda mevcut.

    Raporda Sezar’ın hakkını Sezar’a teslim etme mahiyetinde Babacan’ın “Türk maliye-hazinecilik tarihinde nadir şahsiyettendir” denildikten sonra olumlu katkıları zikrediliyor. Örneğin, Hazine’nin borç yönetiminde ve düşen faizlerinde Babacan’ın performansı kuşkusuz son derece başarılıdır... Bankacılık sektörünün sağlam kalmasında pay sahibidir.” deniliyor. Ama ağırlıklı olarak Babacan’ın son yıllarda kamu alanında popülist yönelimleri engelleyemediği iddia ediliyor.

    Raporda “AK Parti; makro ekonomik çerçevenin siyasetle konsolide etkileşimi bakımından aşamalar halinde, objektivite içinde piyasa dostu tutumdan popülizme, yüksek hacimde makul fiyatlamada kamu hizmeti üretiminden tolere edilebilir-kısmî yozlaşma devamen ağır kirliliğe, bunu korumak için güç politikasına evrilmiştir.” teşhisi konulduktan sonra “Babacan mali disiplinin tavsatılmasında, kamu maliyesinin şeffaflık ve denetiminin azalmasında, makro ekonomik çerçevenin verimlilik ve rekabetten uzaklaşmasında tatminkâr hatta yer yer olumlu işlev dahi üretememiş, üretme ihtimali ziyadesiyle azalmıştır.” iddiası örneklerle savunuluyor.

    Kısacası, Babacan yerinde kalsa bile AKP’nin popülizme yönelmesini ne ölçüde engelleyebilir, sorusu ortada duruyor.

(bu yazı 24 Ağustos 2013 tarihli Zaman'da yayınlanmıştır)

Where I agree and disagree with Babacan

No way out without reforms Last Monday, in an interview on TV, Deputy Prime Minister Ali Babacan made some important assessments of the hot issues that Turkey is trying to handle.These assessments are worth discussing since they are rather realistic and not pure political propaganda. I saw five major topics in Babacan's assessments: the policies of the Central Bank of Turkey, the state of unemployment and its future in terms of economic growth, the sustainability of the current account deficit (CAD) and, finally, the need for reforms.
Minister Babacan started by saying there is no crisis; thus there is no need for a comprehensive economic package. So we can now stop fretting ourselves by trying to guess what kind of measures may come with the famous “Plan B and Plan C” announced by Prime Minister Recep Tayyip Erdoğan just after the central bank decided to increase interest rates. Erdoğan said last month that an "out of the ordinary" economic package alternative to interest rate hikes could be announced. He added that work on a Plan B or Plan C may be announced in the coming days or weeks. We have heard nothing but rumors circulating about these mysterious alternative plans so far. Regarding monetary policy, Babacan reiterated his support for the unconventional policies of the central bank. He argued that the interest rate corridor instrument (multiple and varying interest rates) had prevented inflows of large quantities of short-term capital. As a result, he said, the impact of the US Federal Reserve's policy and the Dec. 17 corruption scandal on outflows had been mitigated, since there was no great quantity of hot money in Turkey. I agree. This point is often missed in the debate about the central bank's monetary policy. That said, I do not agree with Mr. Babacan when he says that the central bank was not wrong in delaying its interest rate decision. Indeed, the Monetary Policy Committee (MPK) refused to move on the issue during its meeting in January, but it was obliged to increase interest rates a few days later in an extraordinary meeting because investors had started to sell their Turkish Lira denominated assets in a panic, causing a dangerous shift in the exchange rate. Mr. Babacan argued that this panic was due to the serious turmoil that had occurred in Argentina and Russia two or three days after the MPK's meeting. This argument is hardly convincing. Personally, I think the political pressure on the central bank was so stifling that the MPK was not courageous enough to increase interest rates earlier, hoping that this omission would not affect investors' behavior. It was a great mistake. However, I fully agree with Babacan's assessment of the evolution of unemployment. He was right in pointing out that the rate of unemployment had been on an upward path, but that during the last two months of 2013 it leveled off. He added, “It is too early to make a comment, but if we see our growth in gross domestic product [GDP] below 4 percent, then the jobless rates could be relatively higher.” So the critical issue is expected growth this year. On this point, the deputy prime minister was rather cautious. After saying that growth performance will depend both on domestic demand and exports, he indicated that it is still too early to make a projection on domestic demand, but expectations on exports to the EU market are promising. Unlike Mr. Babacan, I am almost certain that domestic demand, particularly demand for investment and durable consumer goods in the first quarter, will be very weak. But Babacan is right to expect that there will be more exports to the EU. Last year, these exports grew for the first time since the eruption of the economic crisis. This year, the EU economy seems to be in better shape. So we can count on exports to the EU market. I wrote in a previous column that my growth-rate forecast for this year is around 2.5 percent. Since then, many other predictions have been published. Even the most optimistic ones do not predict a rate over 3 percent. If these turn out to be correct, the Justice and Development Party (AK Party) will be faced with increasing unemployment and stagnating well-being. The deputy prime minister is certainly aware of this challenge. As he pointed out, the Turkish economy is unable to have 4-5 percent growth without lowering its CAD to a sustainable level. Mr. Babacan thinks that this level might be 4-5 percent, but the deficit must be even lower in the long run. Let me point out that the CAD/GDP ratio is actually over 7 percent. Admittedly, the challenge is a difficult one. This may be the reason why Babacan insisted once again on economic reforms during his interview. The fact that he insisted on reforms shows great virtue in these days of political madness.

Babacan is not happy

At the İstanbul Finance Summit last Wednesday, Ali Babacan, deputy prime minister for economic affairs, made critical assessments of the challenges the Turkish economy is facing.
What impressed me most among these assessments was Babacan's confession about the nature of Turkey's ongoing economic growth. He is not happy with its quality. Me neither. Let me quote what he said about this controversial topic. Vice Prime Minister Ali Babacan worried about the quality of growth “When you look at the growth figures by themselves the picture isn't bad, but we have worries about the quality of growth. … We grew by 4.4 percent in the second quarter but the major source of this growth was domestic consumption and a little bit of public spending. We observe decreases in private investment as well as in net exports. … This picture is not one we would like to see. In fact, we would like to see the opposite. We want to have growth based on both private investment and exports. Yes, we grew by 4.4 percent, but what made up this growth doesn't make us happy. When growth is based on these factors [private investment and exports], the impact of growth on the current account deficit [CAD] is positive. However, when the growth is based on consumption, the current account deficit widens.” Babacan added that the government will make efforts to improve the quality of growth. Before explaining why this assessment, which in fact simply repeats the well-known problem of ongoing growth, seems critical to me, let me remind you of some misperceptions regarding Turkey's second-quarter growth. As I tried to explain in my Sept. 9 column (“Two different narratives of growth”), the causes of the second-quarter growth vary depending on the analytical perspective. Babacan is looking at yearly growth (the change in gross domestic product [GDP] from the second quarter of 2012 to the second quarter of 2013), and what he says is true. Nevertheless, quarterly growth (from the first quarter to the second quarter) is different in two respects: Private investment contributed positively, albeit quite moderately, to growth, while public expenditure has significantly slowed. However, let me add that negative net exports continued to widen the CAD. Of course, those nuances don't change the global picture: Turkey's real economic growth is basically based on private consumption and the CAD is widening at a time when the international liquidity glut will be ending sooner or later. The Fed's recent decision to leave the quantity of its asset purchases unchanged only postponed the end of the party for a few months. The only virtue of the Turkish economy's current situation is the government's insistence on fiscal discipline. Babacan underlined this insistency once again at the financial summit, saying that the government has never compromised on fiscal discipline during elections and won't compromise this time, either. He warned that if a widening budget deficit is added to the already widening CAD, then Turkey's economic and financial stability will be damaged. This was a long digression, I admit. So let's get back to the quality of economic growth. At the moment, the Turkish economy is unable to base its growth on exports for various reasons. Turkish industry isn't competitive enough in terms of costs or technology. Hence, it is quite natural that private consumption, fueled by the liquidity glut, is the main engine of economic growth. But this growth regime excessively hollowed out domestic savings and widened the CAD. At the beginning of the 2000s, the CAD-GDP ratio was about 3 percent. It is over 7 percent now. Moreover, as recent Betam research points out (see my Aug. 30 column, “Turkey on the brink of middle income trap”), labor productivity is almost null. For two years, growth has been driven exclusively by capital stock and employment increases. Babacan is right: Under these circumstances, the Justice and Development Party (AK Party) government should make great efforts to shift the unsustainable growth regime to a more balanced one in which exports, on the demand side, and productivity, on the supply side, play a determining role. These efforts -- in other words, the necessary structural reforms (in education, the labor market, the fiscal system, etc.) -- are well known, and as Babacan pointed out, they are written in “the official documents” (development plans, etc.). But where is the political will -- and the decisiveness?

Relax until autumn

Wednesday morning, Deputy Prime Minister Ali Babacan gave an interview to a Turkish TV program and in the afternoon, US Federal Reserve (Fed) Chairman Ben Bernanke testified to the US Congress.
Bernanke seems successful in convincing markets Both of them tried to calm tensions that have appeared in the financial markets during the last weeks and to convince investors that, in fact, there was a terrible misunderstanding. Babacan, following the critical meeting at Dolmabahçe (see my article from Tuesday, July 15, “Plots out, common sense in”) that seems to have succeeded in convincing Prime Minister Recep Tayyip Erdoğan of the dangers of confronting market forces, clearly explained that for 10 years the Justice and Development Party (AK Party) government has played the game of an open market economy and it will continue to play the same game in the future. He also strongly reminded listeners that the central bank is an independent institution and thus free to set the monetary policy according to its mission. So, inside Turkey, tension declined to some extent, as evidenced by a slight appreciation of the Turkish lira and a buoying stock market. As for Bernanke, the stakes are even more important, since misunderstandings regarding the Fed's intentions are detrimental not only to the Turkish economy but for the world's economies. So, Bernanke's testimony to Congress aimed to clarify how the Fed evaluates the current situation of the US economy and more importantly, how it is setting benchmark conditions that will guide its monetary policy in the future. Let's start with Bernanke's mea culpa. The Fed chairman explained that at the June Federal Open Market Committee (FOMC) meeting, he and his colleagues anticipated real gross domestic product (GDP) growth beginning to increase during the second half of this year and eventually reaching 2.9, and 3.6 percent in 2015, and for the unemployment rate to decline to between 5.8 and 6.2 percent by the final quarter of 2015. Moreover, these forecasts have not been subject to external shocks like undesirable federal fiscal policy moves and the slowdown of economic growth in emerging markets. Bernanke specified that “in the interests of transparency, Committee participants agreed in June that it would be helpful to lay out more details about our thinking regarding the asset purchase program … as well as of the likely trajectory of the program if the economy evolves as projected.” Admittedly, markets had overreacted -- this is my interpretation -- to this desire for transparency. According to Bernanke, “With unemployment still high and declining only gradually and with inflation running below the Committee's long-run objective (2 percent), a highly accommodative monetary policy will remain appropriate for the foreseeable future.” First, the Fed will wait until it is sure of the strength of the ongoing recovery and when that is the case, it will start to reduce its asset purchasing. If the US economy has close to 6.5 percent unemployment and 2 percent inflation, the asset purchase program will be terminated as a tool of extraordinary times where the Fed policy interest rate is close to zero and cannot be turned into a negative rate. However, while this extraordinary tool will eventually be out of use, the Fed “… intends to maintain a high degree of monetary accommodation for a considerable time after the asset purchase program ends and the economic recovery strengthens.” This will be done by maintaining the federal funds rate at close to zero. In his testimony, Bernanke took care to add a new clarification regarding the guiding conditions of the monetary policy. He said, “The specific numbers for unemployment and inflation [6.5 percent and 2 percent] are thresholds, not triggers. Reaching one of the thresholds would not automatically result in an increase in the federal funds rate.” Then he explained that if, for example, unemployment reaches 6.5 percent, but not through a rise in employment but rather through a decline in the labor force, or if the unemployment threshold is reached, but not the threshold for inflation, the Fed will not be in a hurry to increase its federal funds rate. All those sophisticated and well-calibrated definitions and announcements are part of the difficult art of communication for central banks. One can assert that Chairman Bernanke gave a good example of this art form. I think that we can sleep soundly, at least until autumn. The risk of financial turbulence has been greatly minimized. Once autumn has passed, we will have to scrutinize very carefully the evolution of the US economy and track this evolution on the roadmap provided by Bernanke. In doing this, we cannot, of course, solve our structural problems, but we may at least avoid the surprises and the damage of high volatility in the markets.