EconNews Roundup

It is definitely not the Econ. event of the year, but since I have friends working there, the Pronto press conference got my attention. The part I found the most interesting was:

Out of Germany’s 90 million population 65 million travel abroad. Out of Turkey’s 72 million, a mere 8 million go abroad. According to Onaran, visa obstacles Turks face create this large gap. "If Turkey did not have a visa problem, the number of citizens traveling abroad would rise tenfold." Onaran said.

From an economist's point of view, this is very easy to test: Just look at a country that recently changed its visa requirement from Turkey and use other countries as control- simple before after study. But my hunches tell me the correct statement should be: "If Turkey were as rich as Germany, Turks traveling abroad would rise tenfold".....

Coming to more serious stuff, the CBT surprised markets yet again, opting for a 50bp cut rather than the expected (and priced in) 25bp. Interestingly, analysts are undecided on whether this was the last cut, another 25bp is in the works or the Bank will cut even more. But rather than the amounts, this month's meeting and the accompanying lengthening of repo auctions could be the harbinger of unconventional central banking. Of course, don't expect anything nearly as drastic as the Fed. All the Bank will be doing are small steps in easing liquidity. The technical rate cut could become reality soon, but we are likely to see the Bank purchase government securities (a really bad idea) or even decrease reserve requirements before that. I might decide to write on this new era in my weekly Hurriyet blog. In any case, I hope to go into more detail in the next couple of days in a separate blog.

To add some controversy into the menu: In disclosing their 2010 growth expectations, Fitch Turkey head made some interesting remarks:

...Turkey would grow below average of the group 2B in which Turkey is evaluated. Despite all improvements in Turkey's budget balance, Turkish economy has the deepest budget deficit in its group...When gross external debts are compared with current external incomes, Turkey has the highest ratios from 1999 to 2008...

I am noting these in response to the hottest news item of last week: An analyst's claims that given its macro fundamentals, Turkey was unfairly rated by credit agencies compared to other countries. Of course, the analysis touched the proud Turks, becoming a big item and forcing the analyst to do a follow-up note the following day. Now, I am not claiming Tim is wrong; in fact, much of what he said makes perfect sense. I am just illustrating the dangers of using selecting certain macro figures to make a ratings point: For every indicator you can find to show Turkey is underrated, you can find another that illustrates it is overrated. However, I have to agree with Tim that anyone who rates Turkey higher than Latvia should see a doctor. Or maybe, it is the whole 2Bs that have been unfairly rated.

Now, on the a bit of realism: Kudos to Babacan for admitting the harsh reality that the fiscal/debt situation is unsustainable. I wouldn't agree with everything in the article, especially the V recovery mambo jumbo, but it is good to know somebody in the government has waken up. Unfortunately, his boss seems to still be in Wonderland.

Last but definitely not the least, it is good to see that highly-respected (at least in my humble opinion) BETAM agrees with me (as I outlined in my last Hurriyet column) that we have seen the bottom of the Turkish slump. Incidentally, they are skeptical of a sharp recovery as well.