Bakış 5

Bakış 5

The topic of the fifth issue of Bakış is “Macro Trends in Turkish and Global Economy”.

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With regards to global economy, and especially emerging countries, 2016 has been a difficult year, due to low levels of oil and commodity prices. Most of the oil and other commodity exporting countries shrank in 2016, as they did in 2015, and global trade continued to decline for the same reason. 

Global trade, which has shrunk around 13% in US dollars in 2015 down to 16.5 trillion US dollars, continued to decline in the first 3 quarters of 2016. With oil and commodity prices recovering towards the end of 2016, even though it started to recover in the last quarter, it is expected that end of year global trade will shrink compared to 2015, down to 16 trillion US dollars.

2016 was a difficult year for Turkey as well. Terrorist attacks, a coup attempt, relations with Russia, developments in Syria, increasing exchange rates all shook the economy, both internally and externally. Due to these effects, the growth performance that the Turkish economy had enjoyed for 27 quarters ended, and the economy shrank by 1.8% in the third quarter. Up until the third quarter of 2016, the current account deficit declined, despite losses in tourism, thanks to the low levels of oil prices, but it started to increase again with the recovery in oil prices and losses in tourism that grew during the summer period. Shrinkage in this period also caused unemployment rates to increase. In the last quarter of the year, in addition to US dollar gaining strength, due to the rate cut by Moody’s and the inland political risks, the Turkish Lira depreciated severely. In summary, while the first half of 2016 started well for the Turkish economy, the second half ended in distress, due to political developments in the world and in the country.

Global markets agree that the world economy will be more successful in 2017 than in 2016. Behind these thoughts, there are expectations that oil and commodity prices will increase, economies of oil exporting countries will recover, and global trade will increase again, following the two-year decline. Institutions such as the IMF, OECD and World Bank, all anticipate 0.3-0.4 points higher global growth in 2017 compared to 2016. Trump's policies are the most significant risk factor for the global markets in 2017. With the expectation that Trump will boost construction and infrastructure investments, the US is expected to grow more aggressively in 2017, and may go through 3 interest rate increases, as expected. This, theoretically, points to the fact that the US dollar will appreciate more in 2017. But of course we cannot know that for sure. Additionally, the preventive measures that Trump is planning against China and Mexico are a significant risk factor for global trade.There is a prevailing expectation that 2017 will be a better year than 2016 for Turkey in terms of growth. In 2017, for reasons such as export prices starting to increase, tourism losses recovering and the political crisis with Russia ends, Turkey is expected to grow at a higher rate, with the strong contribution of net exports in 2017. In the meantime, reform and incentive package initiatives by the government are expected to create a boosting effect on investments and consumption in the second half of 2017.

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