Michael asks: > Sabri, will the Turkish bail-out prevent something similar happening > there? If not, how long can Turkey hold out?
I have not seen any IMF bail-out that solved the problems of any country as yet. One thing is for sure though: if you spend more than you make, there comes a day when you go bankrupt. My unofficially bankrupt Turkey is in a serious depression and the state of the global economy is not helping either. How long Turkey can hold out will depend on many things including what the US does, how loyal the Turkish ruling class to the US is, how obedient the Turkish working class to its screwers is and the like. One should not forget the possibility of an Iraq war and the Turkish participation in it. I don't think it is a good time to make any forecasts now. Rob, what is your take? Sabri P.S: The two articles below may give you some information in building your own expectations. They are from Turkish Daily News, December 1 issue. +++++++++++++ Economy contracts 8.5 percent in third quarter --------------------------------------------------------------------- Turkey's economy posted an 8.5 percent contraction in the third quarter of 2001 compared to the same period of last year, indicating that a deep economic recession continued in the wake of the two consecutive financial crises, while analysts cautioned that resumption of growth would be key for the government's economic program. Gross national product (GNP) contracted by 8.3 percent in the first three quarters of the year, State Institute of Statistics (DIE) announced yesterday. The government has projected that GNP would decline by 8.5 percent this year, which will be the sharpest contraction since World War II. DIE said Turkey's gross domestic product (GDP) posted a 7.1 percent contraction in the third quarter, slightly better than market expectations which averaged 9 percent. Analysts suggested that the economy might have bottomed out in the third quarter and a slight recovery could emerge in the last quarter of the year. "The national accounts release for the third quarter showed a marginally more positive picture of the economy than we had expected," Lehman Brothers economist Tolga Ediz commented in a research note. The nine-month contraction in the GDP was 6.4 percent, a better result than GNP, which was attributed to the decline in net income from the rest of the world amid deterioration in the overall business outlook and lack of hopes for an improvement in the immediate term. A slight recovery was evident in the third quarter private sector consumption spending, which fell by 9.4 percent in the third quarter, compared to 11.6 percent decline in the second quarter. The farm sector contracted by 4.5 percent, industry by 9.2 percent, construction by 8.8 percent and commerce by 7.3 percent year-on-year in the third quarter. "GNP data suggest effective bottoming out in the third quarter. Contraction appears to have stopped and we expect some controlled recovery in the fourth quarter relative to the third," brokerage Finansinvest said in a note. Yet there was caution about the magnitude of recovery prospects. "It is not clear where growth will come from however. External demand remains weak and an export-led recovery is not realistic at this stage. Domestic demand remains weak, and latest survey evidence suggests continued pessimism from businesses," Ediz said in the note. The government expects a GNP growth of 4 percent next year, which analysts see as an optimistic projection, whereas resumption of growth is viewed as key to the success of the government's International Monetary Fund (IMF)-backed economic program. "The most recent data on industrial production, capacity utilization and the business outlook survey reveal that the economy has begun to pick up momentum, having bottomed out through August-September," HC Istanbul chief economist Baturalp Candemir commented. "However, indicators also point out to the fact that the recovery will not be as vigorous as those witnessed in 1995 or 2000," he added. Turkey is preparing to sign a new three-year stand-by deal with the IMF in January, which will replace the one launched at the beginning of 2000 after the two financial crises last year. "We are still of the view that growth prospects are key to the success of Turkey's IMF program. Without an economic recovery, both the budget and the private sector will be under severe pressure, the latter because of non-performing loans and hard currency debt obligations," Lehman's research note said. Ankara - Turkish Daily News ++++++++++ S&P revises outlook on Turkey, affirms ratings ---------------------------------------------------------------- Standard & Poor's yesterday revised its outlook on Turkey to stable from negative, while affirming the single-'B'-minus/'C' long- and short-term issuer credit ratings and single-'B'-minus senior unsecured debt rating. The outlook revision reflects the S&P view that the risk of events leading to a downgrade is now balanced by improved prospects for the continued implementation in 2002 of appropriate financial policies and structural reforms, in the context of a new three-year IMF standby arrangement, the agency said in a note published on its website yesterday. An International Monetary Fund (IMF) team is due to start discussions with the government soon on the new arrangement and ways to close an identified financing gap in 2002 of about $10 billion. The agency said negotiations with the IMF will determine the composition of financing from various sources, despite a widespread belief in markets that the lender has pledged to meet the entire financing gap. "The IMF is expected to approve the new arrangement in January 2002 at the earliest, but much could go wrong during the discussions in the meantime," S&P added. "Nevertheless, prospects of a positive outcome have now improved, following the completion by the IMF of the much-delayed 10th review of the program on Nov. 28." It also said Turkey's ratings remain constrained at these levels by high political and program implementation risk, a high public debt burden, and banking sector weaknesses. "The government has already regained some market confidence and real interest rates have declined somewhat. If this trend continues, widely shared concerns over the sustainability of Turkey's public sector debt will be dampened and the ratings could be upgraded. Conversely, if confidence deteriorates and real interest rates rise, then the ratings would come under downward pressure," Standard & Poor added. Ankara - Turkish Daily News
