Ali Rıza Güngen
The Turkish economy's slowdown continues. According to recent data, this summer's interest rate reduction and global monetary expansion have had very little effect on production and sales volume. What prevails is not recovery, it is a prolonged slowdown.
According to figures from August that were announced this week, industrial production is down 3.6 percent compared to the same time last year. The volume of retail sales is also down 4.3 percent compared to the same time last year. More data regarding the credit loans allow us to assert the economic previsions made by the Erdoğan administration - which were labelled as "stabilization" - cannot subsist in the current global conjuncture. And though the new monetary cycle conjuncture begun in April 2019 carries on, IMF experts say the growth rate will be zero by the new year. The end result is chronic unemployment.
The highest rates
This slowdown is clearly reflected in unemployment figures. Bearing in mind the unemployment rate was corrected for seasonal effects, it stands at an historic high of 14.3 percent (TÜİK, Turkey's governmental statistics agency, does not provide data on unemployment prior to 2005). According to official numbers, Turkey has undergone a loss in employment of 465 thousand in the construction sector, 102 thousand in the industrial sector and 254 thousand in wholesale and retail trade in the past year. Beyond these rates and numbers, further developments attest to the fact we are entering uncharted territories.
In what is a historic first for modern Turkey, long-term unemployment has hovered around 1 million for over a year. Again, in an unprecedented manner, the number of people who lost their jobs in the past 2 months was recorded to be over 2 million. Data suggest a significant portion of those who lost their jobs in the autumn of 2018 were not able to find a new job.
Meanwhile, other dilemmas Erdoğan's government is responsible for cannot prevent figures from being worrying. For instance, Turkey's demographic structure allows close to 1 million additions to the labor force annually. According to such numbers, a rise in employment necessarily entails a drop in unemployment. In short, the prediction in the increase in employment for 2020 that was announced by the Strategy and Budget Chief Naci Ağbal (1 million 52 thousand) implies a persisting unemployment rate of around 14 percent.
Similar to last year, we see that many of the figures announced as part of the middle term program in September were quickly invalidated. In order to reach the 2020-22 Economy Program unemployment rate estimations, an average of 12 percent unemployment should be recorded for August and November. Yet the industrial production and retail sales data I previously discussed imply it is not possible for unemployment to go down. Among the program objectives announced by Berat Albayrak two weeks ago, a rise in employment of 1.5 million is required in 2020 so as to realize the 2020 unemployment goals.
In short, the plans made by the Treasury and Finance minister were refuted by the Strategy and Budget Chief. Official data and developments perpetually disprove him as well.
A financial state of emergency
A global economic slowdown explains why the relatively expansive monetary policies begun in the spring of 2019 have impacted 70 percent of the world economy. Monetary policy reactions to such a global slowdown conjuncture create the basis for capital inflows into countries like Turkey. And if global slowdown trends keep the same countries on pins and needles, incredibly low growth rates are still recorded compared to 15 years ago.
With such crucial developments ranging from geopolitical tension to cross-border operations and the prospect of sanctions against Halkbank that is currently is on trial, it no easy feat to paint a clear picture of lies ahead.
Meanwhile, short-term precaution measures and interventions have shown limited success. For instance, when the open sale of seven banks was banned on October 16, a steep fall in the stock market was swiftly avoided. On the same day, official statements declared various "recommendations" were in place to prevent the lira from rapidly losing value in international market. The Turkish Lira was prevented from further devaluating after losing 3 percent of its value within two weeks in October - in what was a short-term financial state of emergency.
In the long-term however, this unprecedented high and chronic unemployment requires steps beyond avoiding sudden devaluations and preventing rapid capital outflows. In order to effectively curb unemployment, creative action must be undertaken. The public should be granted a role in this effort and more opportunities should be sought in an economy that is so integrated into the global economy.
In spite of itself, it has now become possible for the government to exit the current trap. Ironically, it will probably expect to be thanked for this.