The turkish miracle

Maybe we do not notice it, but we have an emerging country in the Mediterranean.
Turkey, currently the sixth economy in Europe, appears as a paradox in the economic landscape of the continent.
The statistics show that in the third quarter of 2011 turkish gross domestic product rose by 8.2%. In the first three months of 2011 its growth rate was even the highest in the world (+11.6%), ahead of China and Argentina.
The productivity race actually lasts uninterrupted  from 2010 (+ 9.0% in that year), after a recession in early 2009 that had brought the country to -14.7 in the first quarter of this year and -4.8 % at the end of the same.
The results of this quarter were, among other things, greatly exceeding those expected by analysts, which foreshadowed a +6.7%  and expectations of the government, which in the "Programme for the years 2012-2014" assumed a GDP at the end of 2011 at +7.5%.
The leading sectors were the financial (services), retail and construction.
The domestic demand is the major player in the booming,  favored by the country's industrial growth as well as by the expansion of credit (it is estimated an increase of 42% in 2010 in the  low interest personal loans).
Furthermore a whole series of measures that the country has begun to take since 2005, when it started negotiations for its entry into the European Union. In particular, fiscal discipline that has brought tangible economic benefits and a series of structural reforms that have expanded the role of the private sector in the economy and improved the efficiency of the financial sector.
We must not also underestimate the development of a new entrepreneurial class of islamic bourgeois coming from Anatolia (from cities like Konya, Kaysery, Samsun, known as the "Anatolian Tigers"), which has contributed significantly to the industrial growth in Turkey.
Positive level of public debt in 2010 which stood at 42% of GDP.
Inflation, miraculously dropped  from 70% in 2002 to 6.4% in 2010 (despite the rise in energy prices),  is rising at 9.5%, partly because of currency weakness and partly due to growth in demand.
The biggest pitfall for the Turkish economy is its current account deficit, that is the second largest in the world in absolute terms (after the USA) and consists of 78.6 billion U.S. dollars from January to October, about 10% of GDP.
The current account is part of the Balance of payments, and reckons the real transactions relating to goods (trade balance) and services; net income from abroad (capital and work income); way transfer without financial compensation (remittances or contributions of Ue member countries). The current account and the capital movements compose the Balance of payments.
Where the current account have a negative sign the country has seen a deficit; conversely, positive current account produces a surplus.

The major part of the current account deficit stems from the Turkish balance of trade, for which there is a large imbalance between imports and exports.
The great economic growth, resulting in the increase in consumption, caused an increase in imports far exceeded exports (the latest available statistics talk about a ratio of four to one). But not only. The Turkish manufacturing producers consider cheaper to import semi-finished products rather than producing the components themselves, and this is the way to cope with higher costs than competitors (Turkey produces a minimal amount of oil and gas). So, the more the production of the country the greater the imports; and the  85% of the imports covers commodities and semi-finished products. The issue is so important that the Minister for Foreign Trade has decided to ask the automotive industry to produce their own engines and major components, rather than import them.
Then found that the deficit is mostly generated by the trade balance, it also stressed the particular contribution of capital flows to debt refinancing. Only 15% comes from direct financial investment (startup or purchase a company), the rest comes from portfolio and other investments (bank deposits, assets, credits granted by banks), by their nature far less stable.
Foreign investors prefer to concentrate more on other countries, as evidenced by the 8, 1% of GDP represented by its own direct investment in China, 2.8% of Russia or even 2.1% of Poland, compared with 1,3% in Turkey.
Despite economic growth there are concerns in the capital markets, probably attributable to the weakness of the currency: the Turkish lira, for example, lost 10% against the dollar in the last 6 months.
In such situation the monetary authorities behavior is described as "unorthodox".  On the one hand, to cool the credit market, the Central Bank has asked commercial banks to increase the reserve ratio (draining liquidity), the other has cut interest rates to curb inflows of short-term capital (hot money) and reduce the upward pressure on the Turkish lira.
To be monitored, as seen, inflation rose to 9.5% (but remember that some years ago was at 70%), and that even with the currency depreciated and the maneuvers of the Central Bank is certainly not destined to off. The dilemma is: a weak currency would lead to an improvement in exports (Turkish goods become cheaper for foreign countries) and a decline for imports, thus contributing to narrowing the trade deficit (inter alia by reducing the need for funding from abroad). But the inflation that comes from higher prices of imported goods could dilute the effects of the depreciated Lira.
Hence the need for well-balanced levels of exchange rates and inflation; and  the IMF's request to increase the benchmark interest rate, remained at 5.75%, in order to support the Turkish lira.

It is worth remembering that many prophets of doom had predicted a turkish collapse already earlier this year, when was published the extraordinary financial results better than China and other BRIC countries. Instead, the Turkish economy has continued to grow at sustained way. There remains the disaffection of international investors, exacerbated by the closure of the valves of the main international banks.
But maybe there will be something to learn from the lesson that seems to give Turkey to Europe.
Because is his greek neighbor in a situation diametrically opposed, and indeed it suggests the "turkish miracle" as a way to overcome the crisis?
Turkey is rightly waiting for his destiny of a new member of the European Union. But at this point one wonders whether it is still time to reconsider.
The tumultuous recovery that, despite the economic situation is not idyllic, brought out the country of a recessionary situation would be that in the presence of the rigid rules of the euro?
An eurosceptic would answer in a negative way. It remains to be seen, and the time there will be a witness, who will be right in the long game that is splitting Europe.
Meanwhile, Turkey is watching us from above.
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