Wednesday, May 20, 2009

EconNews Roundup

Now, I know why the government has cold feet for the IMF: It's just reflecting on its constituency's feelings for the Fun: A true democracy, you might be tempted to say, if only it were true:). I enjoyed reading the funny comments, especially ones such as the deal will lead to price hikes and the age-old logic that the countries that took money from the IMF are all in a bad situation (never mind this has got the causality all wrong, this is like saying that doctors make people sick). But at the bottom of it, the issue is purely fiscal, as anyone following the debate is well aware of. And the impression I am getting is that the differences between the two sides are larger than I imagined.

Joking aside, the article shows that the public at large is misinformed about the IMF. The case in point is the guy who think an IMF deal would be an EU requirement, while the other comments are not less out of reality. Incidentally, while I have no formal proof of this, the public in Turkey is more informed than many other countries, as they at least knows of the existence of the Fund. From anecdotal evidence from friends working in country desks in the Fund, in many countries, even the media do not know much about the Fund. However, in places with large Fund programs like Argentina, Ecuador and Turkey, the name of the IMF recalls more than Ethan Hunt. But then again, I am not sure who said it, but too little knowledge may actually be worse than no knowledge.

Anyway, refer to my recent entry for a short discussion (and link to a longer one) of the merits and evils of the IMF.

Coming to other news of the day, a Merrill Lynch economist says Eastern Europe and Turkey are to have high growth rates in the next two quarters, I say he is daydreaming. According to the article, he has in mind 3.1% and 4.4% for the next two quarters. Let's do some elementary algebra: Let's assume that (as economists always do) he is right on the recovery, so let's take his numbers for 3Q and 4Q as given. He must also be more or less sure about the double-digit contraction in 1Q, let's give him -12% for that. Plugging the numbers in and if he is expecting the n0w-consensus 4-5% contraction for the year, it turns out that his 2Q contraction is on the order of 15%! The simple explanation is that he is going for a smaller contraction for the year, say 2-3%, which would put his 2Q expectation at 5-6% (negative, of course). While early indicators show that we have seen the bottom of the Turkish recession and the contraction will be much less in this quarter than the last, I see growth near standstill in 3Q and a slight recovery in the last quarter. This puts me at my famous 5% I have been holding on to since November, with the risks slanted downwards (more contraction).

Also, I am disappointed not to find this in any English daily, but CBT President Durmus Yilmaz made some interesting comments yesterday at the Turkish Finance Managers Foundation/ Finance Club. If you speak Turkish, a detailed summary is at a good Turkish econ blog I recently discovered or at almost any daily. When I look at headlines from the speech, like I look at the empty part of the glass, rate cuts reflect to the market with a 3-9 months lag, public finance is grabbing money for the private sector (as if CBT rate cuts weren't providing the cultivating ground for that), I feel that most of this stuff could have come from me: Many of his headlines are the recurring themes in my blog and columns. I keep wondering, then, why I am so worried about their monetary policy strategy. I mean, if I am in agreement with everything the man is saying and yet oppose their reckless easing, then there should be something wrong with me...

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