Turk economy shrinks 13.8 percent

[Giorgos]

Turk economy shrinks 13.8 percent

The Turkish economy shrunk 13.8 percent.



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[Napalm]

Turkey would easily collapse if it weren't for all that money flowing in.

[Prokomenos]

I hope their economy completely collapses and Kurds continue to harass the turks.

[Angelo]

Turkish economy in freefall
By Sinan Ikinci
7 July 2009

Last week, the Turkish Statistic Institute (TUIK) announced that Turkeys economy shrank by 13.8 percent in the first quarter of 2009, compared to the same quarter a year ago.

This figure is even worse than the expectations of individual economists as well as financial and academic institutions, which hovered at around 11 percent.

In particular, economists with Islamist sympathies tried hard to downplay the crisis by keeping their estimates of contraction as low as possible. Some even claimed that there would only be a 6 percent contraction. This was the position taken by the Islamist AKP (Justice and Development Party) government, which has declared that the crisis is largely psychological.

Wholesale and retail trade, construction and manufacturing are the worst hit economic sectors. They recorded massive drops of 25.4 percent, 18.9 percent and 18.5 percent, respectively.

The rate of contraction in private consumption and investments accelerated significantly. Private consumption, which dropped by 4.6 percent in the last quarter of 2008, plummeted by 9.2 percent in the first quarter of this year. This is an even steeper decline than the one experienced during the devastating 2001 financial crisis.

In terms of real GDP, this figure marks the steepest quarterly decline in economic growth since 1945, when the economy was in depression due to the Second World War.

When calculated in terms of the US dollar, the contraction in the Turkish economy is 29 percent. This is mainly due to a loss of value suffered by the overvalued currency (Turkish lira) under conditions of economic crisis. Before October 2008, when the tidal wave of the global crisis first reached the shores of the country, an overvalued lira was used to inflate the countrys GDP in dollar terms.

In addition to sustaining a 13.8 percent contraction in fixed prices, the Turkish economy recorded a 2.2 percent decline in current prices in the first quarter of the year. This is a first in the modern history of Turkish capitalism and points out a very dangerous trend of wage deflation. (See Dramatic decline in Turkish wages) Significantly, this figure has been largely ignored by the media and its commentators. Even the Islamist daily Todays Zaman sought to downplay the significance of this latter figure, arguing that 2.2 is much smaller than 13.8! In fact, on the contrary, it is the decline in current prices that highlights the extreme gravity of the situation.

The GDP figures make clear that Turkey is one of the worst affected economies in the world. Only Estonia and Latvia are falling at a faster rate.

In the last quarter of 2008, the Turkish economy contracted at a rate of 6.2 percent. Last week, many commentators in the news media described the two consecutive quarters of contraction as a recession. In fact, when the situation is assessed together with other main macroeconomic figures and leading indicators, it becomes clear that Turkish capitalisms contraction has already reached a disastrous quasi-depression level.

Since October 2008, exports have been plummeting, industrial and manufacturing output as well as capacity utilisation has been declining, unemployment has hit unprecedented levels, new investments have crawled to a halt, consumer demand has collapsed due to deepening wage deflation and rapidly growing social and economic inequality, while the profits of non-financial companies have dipped.

One of the major consequences of the global crisis for developing countries is a dramatic cut in exports. This is why the drop in exports plays a major role in determining the severity of Turkeys economic crisis and serves as a critical leading indicator. In this respect, the most recent data show that exports continued to decline in June with no prospects of recovery.

Last week, the Turkish Exporters Assembly (TIM) announced that the countrys exports continued to slide by 32.78 percent to US$8.1 billion in June 2009, compared to the same month of the previous year.

[Napalm]

That's interesting yet not surprising that they are in freefall still while most other countries have at least stablized.