A good and a bad scenario for the economy (2)

In this column on Saturday, I wrote about the risk of a serious crisis for the Turkish economy that may arise in the autumn-winter period. I added that the slowdown in domestic and foreign demand, whose signs we see in the data, and the ongoing inflationary environment may lead Turkey to a crisis that will take years to get out of.

This is a negative scenario that may arise for all of us and a very serious preparation is required. On the other hand, I talked about an opportunity scenario that we may encounter towards the spring of 2023. In this article, I will discuss this opportunity scenario and what we need to do to seize this opportunity.

As you know, interest rates have started to increase all over the world, especially in the USA. This interest rate increase process is focused on the effective fight of these countries against inflation. The US Federal Reserve (FED) states that it is quite clear on this issue in its last meeting and afterwards. The rate hike process may continue even more drastically in line with the developments in US inflation.

However, it is also said that this interest rate increase process will create a serious recession risk in the economies of the USA and other developed countries.

here for us The scenario that can be an opportunity is at this point. Activated.

A recession that can be seen by the beginning of 2023 with high interest rate hikes will force these central banks to waiting period or even interest reduction process may compel. We saw a similar period in 2019, “although the conditions were not the same”. By November 2018, the US Federal Reserve had increased the interest rate to 2.5%.

However, due to the fluctuation in the financial markets, the fact that the inflation did not reach the targeted 2 percent level and the business did not go as expected in the US economy, it started to reduce interest rates as of the beginning of 2019. You may even remember that after these decisions, there were also those who accused the FED of bowing to US President Trump’s criticism of high interest rates.

No need to tell the long story.

At that time, we saw that our economic problems, which peaked with the Brunson crisis in 2018, eased a bit. While the interest rate hike by the CBRT in September 2018 and the government’s statements that it would return to relatively more reasonable policies, the exchange rates calmed down, and the inflation, which reached 25 percent in the following period, started to decline. In this period, the US’s interest rate cuts on a global scale became an important trump card that made it easier for us.

Now, we have the possibility of experiencing a similar period in 2023.

In other words, with rapid interest rate increases and a recession that may occur in the USA and developed countries, the FED may take a step back from the interest rate increase process in the next year.

The realization of such a scenario means that global conditions will become much more favorable than today for the Turkish economy, which has accumulated economic problems, and for the economies of other developing countries.

Such a scenario means that the direction of the dollar will return to developing countries. It means that developing countries in need of foreign exchange save time!

Well, if such an opportunity arises, can Turkey seize this opportunity with its current economic policies?

Unfortunately not in these circumstances.

An economy with a management that causes foreign exchange control to be discussed with almost every new decision cannot take its share from such a favorable environment.

As I said, there are quite possible scenarios on the agenda that can develop first against us and then in our favor in the economy.

As I said in the first post, these are all possibilities.

Of course, we’ll see how long it takes. But it is known that under these conditions, while Turkey is the most adversely affected in the worst scenario, if this policy and economic management continues, unfortunately, it is not in a position to gain the time and breath we need in the good scenario.

It is imperative that we return to the normal that we have forgotten as soon as possible.

Only then can we work things out.

Otherwise, a new train will be added to the trains we missed, at a time when we are in much more difficult conditions.

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