If there was any lingering belief in the “bypass” school of Turkish economics, Wednesday’s news should put an end to it. Contrary to the prime minister’s optimism, the official statistics from the first quarter of the year are in. Turkey’s GDP slid almost 14 percent, the biggest quarterly slump in at least 60 years, a number dwarfing the government’s official forecast of a 3.6 percent contraction this year.
So what to make of this?
On the bright side, the financial sector has emerged largely unscathed. Profits of banks and finance houses are up and the resiliency in the sector is encouraging. We might add that independent economists seem of a consensus that when the yearly statistics come in, Turkey is likely to close out 2009 with a contraction in the neighborhood of 6 percent. So if you can come off a first quarter with a 14 percent slide and still close out the year with a GDP slump less than half that, we read this as a message that we have hit bottom and are now edging back up. Cold comfort but comfort of a sort.
But pain is widespread just about everywhere else: corporate profits down, unemployment still edging near 16 percent, and exports - already down by a third - continue to slide. The tourism sector, as we know, is soldiering on but still down in most estimates by 1 percent or so from last year.
"This is an extraordinary time and an extraordinary number," Morgan Stanley economist Tevfik Aksoy told us. "In the past, Turkish crises were either domestic or external. This time it is both."
This is perhaps the most salient point. Turkey can do some things to improve its odds, but the global nature of the current depression means there is no magic elixir.
What Turkey can do, however, is begin to act beyond palliative remedies. Incentive packages announced by the government may aid regional development in the years ahead, but they are meaningless in any immediate sense.
With or without an agreement with the International Monetary Fund, a medium-term strategy is urgently needed and Turkey does not have one. If the government continues to resist an IMF package, Turkey can live with that. But detailed commitment on fiscal restraint in some areas and fiscal stimulus in others is overdue.
We also think it worthwhile to heed the sage counsel we reported Wednesday of Michel Akavi, the head of DHL Turkey. The post-crisis economy will be very different than that with which we are familiar, with narrowing wage gaps worldwide and rising fuel/transport costs trimming the dominance of China. In a word, the emerging new economy will be more "regional," Akavi argues.
There is much the government can do to support exporters, manufacturers and even tourism operators to prepare for this new world. It is time for clear medium-term economic leadership.