Therefore, in order to achieve the yearend target rate of 4 percent growth, the only hope lies in the last quarter. The growth performance that would help the economy to achieve the annual target requires at least 6.5-7 percent growth in the fourth quarter. Is this a realistic expectation? That depends on many parameters.Let me first summarize the basic dynamics behind the erosion in the second quarter, and then assess what is required for a final attempt at growth.
1. As the external situation worsens, its negative repercussions have become more visible in the domestic economy in terms of rising current account deficit, a relatively deteriorated finance composition from foreign direct investment to long-term credits and portfolio investment and worsened inflation of both consumer and producer categories.
2. It is also commonly agreed by businessmen that the closure case against the ruling Justice and Development Party (AK Party) created deep uncertainty, and therefore economic plans and decisions were postponed.
3. A final case that prevented growth which I would like to give some details of is the extremely tight fiscal and monetary policies.
The Ministry of Finance has announced the central government budget figures for the July-August period. According to the statistics, in the first eight months of the year, the budget had posted a surplus of YTL 4.6 billion. Meanwhile the primary surplus reached YTL 40.9 billion, exceeding the full year target.
Despite slowing economic performance, the revenue front is strong. Among the revenue items, tax revenues rose by 16 percent year-on-year. As was expected, parallel to declining domestic demand, indirect tax performance was rather limited compared to the top line. For instance, value-added tax (KDV) revenues grew by only 7 percent year-on-year in the first eight months. Further recovery in this component is unlikely in the period ahead. For the first time, the share of indirect taxes, as an indication of tax injustice, declined to 64 percent from above 70 percent for several years. In addition to the tax revenue, in the revenue performance, transfers from the privatization fund and the revenue generated through the sale of ports dominated.
On the expenditure side, the government has spent only 64 percent of its expenditure allocation for the year, keeping in line with the plan.
Although we are not in a position to applaud the quality of budget performance yet, the quantity is strong at a period of domestic and external turmoil. Having considered the situation of small and medium sized enterprises (SMEs) throughout the country, I would suggest a continuation on the monetary front but a relaxation on the fiscal side so that public spending on non-inflationary infrastructure with big positive externalities and support to SMEs. Both spending approaches would stimulate the entire economy as they would have a significant accelerator effect.
Benzer Haberler 
