Global economy has witnessed various developments with the tensions caused by the trade wars that started in early 2018. While this situation increased the risks and uncertainties toward world economies, it is also leading countries to search for alternative markets with respect to the future of the global finance system.
Taking into consideration the attacks on Turkey's economy as well as the economic sanctions imposed in recent months, this conjuncture signals that the threats targeting the future of global economy are increasing by the day; and in this case, developing countries in particular are obliged to take on a strong and solid structure to secure themselves.
The New Economy Program (YEP) that was announced last week in this scope, gives the new estimates regarding fundamental macro-economic indicators aimed at Turkey's economy, while it also presents a road map for the new economy story.
Well, what stands out in the new economy story?
No preference between account deficit and growth
The goal in the upcoming period is to reduce the current deficit, while also increasing production in an atmosphere where the current deficit is reduced. In other words, a reduction in the need for high import-based external financing is the first step to be taken.
However, this restriction in import will not be allowed to have a negative impact on our production. Taking into consideration the gas-brake debates in 2012, production needs to be commenced at once in certain fields, as stated in the program too, to avoid having to make a preference between current deficit and growth, and to prevent an increase in the current deficit while growing.
Our main priorities in this regard is to reduce our foreign dependency in areas such as pharmaceuticals, chemicals, petro-chemicals, energy and machine equipment.
The need to reduce foreign financing
As is known, one of the main reasons countries need external financing is the lack of adequate saving.
We need savings, which is the key to economic security, more than anything today to avoid a repeat of the financial fragilities Turkey experienced in the past, to avoid facing manipulations and high interest payments through exchange rate activities, to prevent the private sector from losing competition strength in production, and to stop credit rating institutions from using their downgrades as a threat.
Hence, as foreseen in YEP, all the public savings planned in the upcoming period, should be an element of encouragement for all players of the economy from family members to the reel sector.
We see strong steps being taken today with this program to reduce foreign dependency. This is also an important precautionary measure for any high inflation and exchange rate activity that may occur.
Continuity in financial discipline
Turkey was able to quickly evade the impact of an incident like the 2008 global economic crisis that led to great damages in world economies, thanks to its low budget deficit and public debt in the gross domestic product (GDP), with its stellar performance regarding financial discipline in recent years. The most fundamental reason that it was not affected by the recent activity in the exchange rate is, without a doubt, the strong structure of its public finance.
Hence, continuity in public financing in YEP is inevitable. Also, it should be pointed out that the term "discipline," which is mentioned among the fundamental terms of the program, is almost identified with public financing.
Necessity of structural reforms
Turkey's reforms to increase local production and provide the inputs necessary for production locally, will both reduce foreign dependency and increase production, in other words, the GDP.
Additionally, continuing with structural reforms in the financial area, which has the resource required for production, will maintain the Turkish economy's resistance against foreign streets.
Following and monitoring the program
Now it is time to implement the New Economy Program that has been prepared. The implementation of reforms and monitoring the efficiency of the program to reach the macro-economic indicators targeted, is the most fundamental factor for the success of the program.
Here’s wishing that YEP will be the start of a new success story.