SEYFETTIN – 2015 will be tough

2015 will be toughThe Istanbul Economic Research Association (IEAD) published its yearly survey (Dec. 2-16) of the opinions of Turkish teachers of economics and asked them about the economic situation in 2015.

They surveyed 191 economists. The opinion of the majority is not positive in brief, they think that Turkey will not be able to solve its basic problems.

The economists who participated in the survey are not very optimistic about the European economy either Seventy-four percent do not expect an improvement in the European financial crisis. However, they are rather optimistic regarding the US economy.

Seventy percent expect a revival next year, but 79 percent also foresee an increase in the US Federal Reserve (Fed) policy interest rate. Roughly, I agree with these predictions.

It is obvious that if the European economy does not return to even modest economic growth and if the interest rates increase in the US, the Turkish economy will suffer from these events. The continuation of recession in Europe would prevent the increase in exports to this zone that constitutes almost half of Turkish exports.

We must remember also that the Russian financial crisis and the war on our southern doorstep make it difficult to find alternative markets. As for the increase in the Fedand#39s policy rate, this will put pressure on Turkish interest rates.

Consistent with these external expectations, a large majority of Turkish economists have a very pessimistic view about economic growth. The survey indicated that 92 percent predict gross domestic product (GDP) growth of over 2 percent, but 81 percent do not think that the growth will be more than 4 percent.

The average GDP growth expectation for 2015 seems to be just over 3 percent. I agree.

At the beginning of this year, I had forecast 35 percent GDP growth for this year Now, it seems that growth will be just over 3 percent. Given the absence of economic reforms and the fact that Europe is in bad shape, I do not see any possibility of overcoming low growth.

Given this context, 34 percent think that unemployment is the major problem This is a rather low rate. Indeed, the number of unemployed individuals has reached 3 million and the total unemployment rate is 10.

5 percent, while the non-farm rate 12.7 percent.

Moreover, unemployment is on the rise, and that will continue as long as GDP growth remains under 4 percent.The second worry of the economists is the next election.

Of those surveyed, 27 percent said they think that the coming elections are capable of causing political instability. In turn, half of them (54 percent) think that this political instability could cause economic instability.

The share of those who think that the elections will not have any impact on economic stability is 36 percent. Those who think that the impact will be positive make up only 10 percent.

Indeed, the elections may cause instability. If the Justice and Development Party (AKP) does not get more than 330 seats, it will not be able to make a new constitution, and thus the presidential system will be off the agendaSuch an outcome is quite possible because a constitutional referendum must be approved by 50 percent of the vote.

This is very difficult. A recent survey gives the AKP 47 percent.

If it is impossible to switch to a presidential system, President Recep Tayyip ErdoIan will be isolated from power That result could jeopardize the harmony between Prime Minister Ahmet DavutoIlu and ErdoIan, and then cause trouble within the AKP.Let me add that more than 80 percent of the participants expect the inflation rate in 2015 to be over 7 percent.

If the exchange rate continues to depreciate, this is quite possible and this will be another failure for the central bank, which promised a rate close to 5 percent.This overall picture for 2015 is not very encouraging.

Turkey has severe political and economic problems. The solution to the political problems requires that a new constitution reflect a true democracy, and the economic problems require radical reforms, which in turn require strong political will.

This dual requirement is not impossible, but it is not guaranteed either.

SOURCE: Today’s Zaman