HOW DOES THE GLOBAL CRISIS AFFECT THE TURKISH ECONOMY?

On October 30 both the Washington Post and the Financial Times mentioned in reports about the global economic crisis that the Turkish economy was one of those that may have some difficulties during the crisis. The Financial Times reported that:

“…moves by the Federal Reserve and International Monetary Fund (IMF) to make dollars available quickly and without conditions to a select group of emerging markets raise questions about the impact on those left out of the schemes. The initial response from investors was positive, with a broad-based rally in emerging markets. Stock prices and exchange rates in Turkey and South Africa, which may not qualify for either new source of funds, rose” (Financial Times, October 30).

Economists think that this will not be good for those economies that are left outside the protective cordon. In addition, the Washington Post reported that “The IMF has agreed to lend billions of dollars to various countries.” Turkey could be one of the countries that need the IMF’s loans. “According to a newly published estimate by the Deutsche Bank, Turkey alone could need $90 billion” (Washington Post, October 30).

These short reports about the Turkish economy were enough to spark increased political fragmentation in the Turkish media as well as in political circles. Pro-government dailies were quick to play down the news. The daily Yeni Safak headline was “German blackmail.” Yeni Safak stated:

“While the world sees Turkey as a “safe port” during this crisis, Deutsche Bank said Turkey needed $90 billion. When it comes to the Turkish economy, the Deutsche Bank is known for its pessimistic statements. In 1994 and 2001 the Deutsche Bank underlined similar pessimistic views as well. Economic experts think that the Deutsche Bank does this intentionally” (Yeni Safak, October 31).

On the other hand, the editor-in-chief of the anti-government daily Hurriyet wrote a column suggesting that it was big news that needed to be in the headlines. Yet, when summarizing the Financial Times story, he injected new information into the story: “The Financial Times’ report on the Turkish economy has good news and bad news. The good news is that the IMF considers Turkey among the developing economies. The bad news, however, is that the IMF may not make a loan to Turkey because of its deficit” (Hurriyet, October 31). The Financial Times article, however, did not mention anything about Turkey’s deficit problem as a cause for Turkey to be left out of the IMF’s program. Furthermore, a day before the “bad news,” the Washington Post reported that:

“The IMF is creating a new program to get money quickly to developing countries with strong economies that are facing cash crunches in the global financial crisis. The immediate beneficiaries could be developing countries with strong economic records such as Turkey, Brazil, and South Korea” (Washington Post, October 29).

Contrary to what has been reported in the international media, Turkey’s second largest newspaper, the daily Sabah, which is known for its pro-government stance, highlighted the European Bank for Reconstruction and Development’s (EBRD) $600 million budget for funding programs in the cash-strapped country (Sabah, October 31). Although Sabah presented the $600 support as if the EU were stepping in to help Turkey during the global crisis, the EBRD funding has nothing to do with the crisis. Rather, it is part of a program related to Turkey’s EU membership process. In fact, Thomas Mirow, the EBRD president, announced that the bank, established to support the countries of the former Communist bloc, had decided to expand its activities to Turkey (Financial Times, October 29).

Because the Turkish media is divided along ideological pro-government and anti-government lines, international observers should be circumspect about assessments of the Turkish economy by either side. When reading economic reports from the Turkish media, observers should be aware of the media outlets’ political positions.

What seems to be accurate, however, is that the Turkish government is aware that the global crisis could badly harm the Turkish economy, especially manufacturing businesses, export companies, and industries that have barrowed money from risky sources. At the same time, however, the government does not want to create panic, which might worsen the volatile situation. It was reported, in fact, that the government might sign a precautionary standby agreement with the IMF (Milliyet, October 31). In addition, reports claim that a Gulf investment firm will reveal a $6 billion investment plan for eastern Turkey today (Zaman, October 31)

Kemal Dervis, who established fundamental reforms in the Turkish economy after the 2001 crisis in Turkey and is head of the United Nation Development Program (UNDP), gave the most accurate assessment of the impact of the global crisis on Turkey’s economy. He said that “Turkey’s risk is smaller than that of many European countries. The Turkish banking sector is in better shape than European banking sectors. However, the crisis will have an impact on manufacturing, the industrial economy of Turkey” (Zaman, October 18). It appears that the government shares Dervis’s view. The minister of finance revealed a government plan to provide credits to small businesses, manufacturing companies, and the industrial sectors to minimize their risks (Star Gazete, October 20).

However, given the fact that Turkey is approaching the eve of a local election, when the government is spending money to provide better services, it is not known at this stage whether the government will be able to implement its plan effectively.