Comments on the economy must be moderate

Even though they are somewhat cautious, two important rating institutions do not expect any critical economic problem next year for Turkey. This is good news for a large group of optimists who do not want to hear about any possible problems either just around the corner or further down the road. However, there is another group that is not so happy about the present situation and is making overly pessimistic projections about the future. Both of these two poles are not healthy and, again, they might both prevent sound projections for the future, which are necessary to facilitate the timely use of economic policies against unexpected problems.

There has been a slowdown in the current account deficit increase recently, although the deficit-over-GDP figure is still quite high. On the other hand, the present level of consumer prices is having a positive impact on inflationary expectations, and monetary authorities can almost guarantee that inflation will be tamed further next year.

However, it is obvious that there are still risks, and some voices from the government side, especially from the macroeconomic managers, are giving the impression that those risks ahead have been understood. This is good news, but naturally only if that approach does not change during the coming months. Budgetary projections for the next year must be realistic in order to prevent distortions in macroeconomic balances.

All these risks do not, of course, yet indicate that a serious economic crisis is inevitable in Turkey next year. However, it is better to be ready for external shocks and for unexpected domestic problems. It must be remembered that even though there have not been serious problems in the world economy, Turkey has often faced crises because of domestic political turmoil and the application of irrational economic policies.

It is politically better to be modest when talking about Turkey’s success stories. It is obvious that when the worldwide crisis began, some sectors were in better shape, especially compared with most European countries. Markets stayed calm, growth accelerated, the unemployment rate fell, inflation was tamed and even a slight development in income distribution was realized.

But all these positive developments do not mean that most of the problems were permanently solved and that there will be no further, serious problems in the Turkish economy. The current account deficit and its financing by hot money inflow still carry important risks, especially when serious foreign and domestic political problems are taken into account.

In almost all countries, people have short memories about disagreeable predictions made by politicians, especially when those ill omens don’t come to pass. But they never forget exaggerated positive predictions whenever promises fall short. This always causes embarrassment and a loss of popularity for the politicians who exaggerate present and expected positive developments. So if it is necessary to reiterate, it is better for politicians not to exaggerate but to be moderate when making comments, especially on foreigners’ praises, even if they are made by important international institutions.

It is understood that those managing economic policy are trying to attain two contradictory targets together, as they attempt to avoid a further slowdown in growth while simultaneously not destabilizing financial markets. Many Western governments were not successful in doing that mainly because they exaggerated both the bad news and, in panic after the beginning of the crisis, slightly good pieces of news as well. This proves that comments on economic indicators had better be moderate.