The Kapali Carsi

What to make of the Turkish government’s statements?

Reader economopoulos asks at the comments of the addendum to this week’s Hurriyet / Roubini column:

Do you think the recent comments by the government officials might be part of a ‘soft-landing’ strategy?

To answer this question, let me start by posing some questions that Atilla Yesilada asks at his daily yesterday. The questions are his, the answers are mine:

  1. Is the current account a problem? According to econ. tzar Babacan, AKP topbrass Gedikli and Central Bank Governor Basci, yes. But Economy Minister Caglyan thinks it is not.
  2. Does Turkey want a ratings upgrade? Yes, I guess, but doing smart wordplays with Fitch will not help.
  3. Does the government want to slow down growth or keep it at this rate if possible? Again, Babacan would go for the former, but Caglayan and PM Erdogan are for zero real interest rate, high growth.
  4. Is there danger of a crisis? Warning consumers to spend less and save more, Gedikli thinks so, but Caglayan underlined on Monday that he had thrown the word “crisis” down the drain.
  5. Is inflation-targeting still in effect? Definitely, according to Basci. But the markets are very skeptical.
  6. Is the CBT targeting a currency level? The CBT says it cares about volatility, but I just read a couple of research reports speculating on when (as in at what level) the CBT would intervene in currency markets.

I knew these dilemmas for sure, but I became actively aware of them when the journalist I was conducting an interview with (the first of yesterday’s three interview requests) posed them to me. Similarly, when he asked me on what the government’s strategy was, I could not say anything, just that we needed to wait for September’s Medium-term Economic Program, or MTEP. Besides, as you see above, the comments by governments officials are contradictory. That’s why I argued in this week’s Hurriyet / Roubini column that the real culprit behind lira woes is the government…

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