Mig33 ASIA

Mig33 Asia Community The World On Your Hand


    Big Turkish Weddings Ravaged by Runaway Inflation Erdogan Abets

    Share

    sang_garuda
    Super moderator
    Super moderator

    Male
    Jumlah posting : 1325
    Age : 93
    Location : Indonesia
    Interest : Profit
    Mig33 Username : sang_garuda, disco
    WARNING :
    0 / 1000 / 100

    Reputation : 1
    Level : 42
    Registration date : 11.07.08

    Big Turkish Weddings Ravaged by Runaway Inflation Erdogan Abets

    Post by sang_garuda on Thu Aug 28, 2008 8:20 am

    At Denizati, a bakery in Turkey's capital city of Ankara, customers can no longer afford the top-priced cream and pistachio wedding cakes because of high food and fuel prices. As the cost of flour and sugar has more than doubled since 2007, the family owned bakery has had to fire 4 of its 15 employees.

    The bakery is one of the fortunate shops on Hosdere Street in central Ankara. In a five-block stretch of the street, 10 businesses are up for sale or shuttered. ``Customers aren't coming anymore,'' says Hanim Baltici, manager of the Kartal liquor store, which will close if no one buys it. ``They're all in debt, and every penny they earn goes straight to the bank.''

    After a six-year boom, marked by the construction of multistory shopping malls, art and history museums and a highway network to replace potholed roads, Turkey's $660 billion economy is racked by inflation once again. Driven by record commodity prices and a surge in government spending, the rate jumped to 12.1 percent in July from a 37-year low of 6.9 percent a year earlier.

    As inflation quickens, the economy is slowing, reminding Turks of the stagflation that ravaged the nation in 2000 and '01 and shaking their confidence in Central Bank Governor Durmus Yilmaz.

    ``Inflation is like high blood pressure: Once you have it, it's very difficult to get rid of,'' says Ersin Ozince, the 55-year-old chief executive officer of Turkiye Is Bankasi AS, the country's second-biggest publicly traded bank. ``We need to be very decisive and very careful now because of the painful experiences of the past.''

    Islamists and Secularists

    The political turmoil in Turkey -- the only Muslim member of the North Atlantic Treaty Organization and a Western ally in the fight against terrorism -- isn't helping.

    In July, the Constitutional Court put an end to the latest confrontation between the Islamists who control the government and secularists. The armed forces, who head the secularist camp, have toppled four governments since 1960. They're fighting the ruling Justice and Development Party, known as the AKP, for pushing Islamic practices such as the wearing of headscarves.

    The court rejected a lawsuit to outlaw the party for mixing politics and religion while also punishing the AKP by slashing its state funding in half to $20 million for next year.

    Fighting the Kurds

    Two days before the ruling, terrorists ignited two bombs on a busy Istanbul shopping street that killed 17 people and injured more than 150. The government of Prime Minister Recep Tayyip Erdogan responded by using warplanes to bomb the mountain positions of the Kurdistan Workers' Party, whom the government suspects was behind the Istanbul attacks.

    Turkey's two-decade battle against the autonomy- seeking Kurds helps explain why it has NATO's second- largest army, which devoured almost 10 percent of the national budget last year.

    Erdogan, 54, is becoming more spendthrift, particularly now that he's no longer reined in by an International Monetary Fund accord. In 2005, Erdogan agreed to IMF-backed budget targets in exchange for a $10 billion loan to pay off debt stemming from the government's rescue of the banking system four years earlier. The spate of bank failures was caused by unregulated lending and helped push inflation above 70 percent at the start of 2002.

    Erdogan Defies IMF

    Last year, in an appeal to voters prior to the general election, the AKP violated the IMF accord by boosting spending to bring drinking water to isolated villages and distribute free food and household supplies to 500,000 of Ankara's 4 million inhabitants.

    The AKP, which also tried to criminalize adultery in 2004 in a country that's 99 percent Muslim, won the election with 47 percent of the vote. The percentage of voters backing the AKP over 13 other parties was the largest in a general election in more than four decades.

    The prime minister is now opening the spigot even wider. In May, during the same week in which the IMF agreement expired, the government announced plans to invest $15 billion over five years in farm irrigation and new roads in the largely Kurdish, southeastern part of the country.

    The spending, which may help Erdogan win elections in March in this region, will turn a budget surplus of 1.9 billion liras ($1.6 billion) in the first half of the year into a 15.9 billion-lira deficit by the end of 2008, according to government projections.

    Inflation Fears

    ``There is fiscal loosening, and it will not bode well for inflation,'' says Asli Savranoglu, an economist at EFG Istanbul Securities. ``Spending will no doubt increase ahead of the local elections, and the municipalities have probably started to spend more than budgeted already.''

    Erdogan's stepped-up spending comes as a 43 percent jump in global food prices in the 12 months through June and $120-a-barrel oil batter Turkey's economy. In a nation that relies on imports for 95 percent of its energy, the cost of a ferry trip across the Bosporus waterway dividing the European and Asian halves of Istanbul jumped 22 percent to 1.40 liras in June alone.

    High oil and natural gas costs, as well as the lira's appreciation during the past two years, widened Turkey's trade gap to $37 billion in the first half of 2008 from $27.7 billion a year earlier.

    Central Bank Stumbles

    Yilmaz, the 61-year-old central bank governor, has stumbled in trying to check inflation. The bank won its independence from government control in 2001 as a prelude to the IMF accord. Yilmaz, a City University, London- trained economist, worked at the bank for 26 years before he was promoted to the top spot in April 2006.

    He wasn't the government's first choice: one AKP candidate, who was rejected by then President Ahmet Necdet Sezer, was the head of an Islamic bank that follows instructions from the Koran to avoid interest payments.

    Within a month of becoming governor, Yilmaz reversed three years of steady cuts that had taken the benchmark overnight borrowing rate to a low of 13.25 percent from 80 percent in 2001. The governor, in moving to boost the slumping lira, added 4.25 percentage points to the rate in the space of two months. The currency rebounded 6 percent in July 2006 after the rate hike to 17.5 percent.

    Yilmaz Under Pressure

    The following year, government ministers and industrialists, concerned about an economic slowdown, began publicly attacking the higher rates. Although Yilmaz ratcheted down the rate to 16.75 percent in August, arguing that inflation was slowing toward his 4 percent target for 2008, that wasn't low enough for exporters and labor unions, which placed full-page ads in national newspapers.

    ``Don't let employment and production die,'' the Turkish Exporters Assembly and the country's largest unions said in their Oct. 16 ads. ``Don't just act like you're cutting interest rates, really cut them.''

    Yilmaz's series of four more cuts to 15.25 percent by February 2008 prompted economists and investors to question the bank's independence from political pressure. ``The central bank is still maturing into its autonomy,'' Isbank's Ozince says. ``Even central banks can make mistakes, but it's hard to steer the right path, because unknown factors can dominate, especially in shallow waters like Turkey's.''

    Missing Targets

    Only three months later, in May, as it became clear that the governor would miss his inflation target for the third straight year, Yilmaz began hiking rates again, to 16.75 percent. He also set a higher inflation target of 7.5 percent for 2009.

    ``They've been missing inflation targets for too long,'' says Jean-Dominique Butikofer, who helps manage about $725 million as head of emerging-market debt at Union Bancaire Privee in Zurich. ``They should have reacted much earlier on rates. The jury is still out to decide if inflation is being tackled or not.''

    As industrial leaders launch a new round of barbs at Yilmaz -- Nurettin Ozdebir, chairman of the Ankara Chamber of Industry, called the central bank ``cowardly and timid'' in July -- the governor has little room to move. After the economy expanded at an annual rate of almost 7 percent in the six years from 2002, Turkey began slowing down.

    Growth Slows

    The bank's July survey of about 80 economists and businesses forecasts growth of 4 percent this year and 4.5 percent in 2009. ``The data shows us that the economy is continuing to slow down,'' Yilmaz said on July 28. ``Domestic sales, production and indicators of confidence support this view.''

    Turkey's six-year expansion -- the longest in its history --has been fueled by tighter bank regulations, the sale of state-owned companies and a surge in investment from overseas. The AKP drew in $51 billion in foreign direct investment in the three years to 2007, more than the combined total of all the governments before it. The funding, along with IMF-mandated tight budgets, allowed the government to reduce public-sector debt to 39 percent of the country's gross domestic product last year from 74 percent in 2002.

    Modern Art Museum

    As wealth grew in Istanbul, property developers swarmed to its dilapidated 19th-century buildings, described in melancholy terms in Nobel Prize laureate Orhan Pamuk's memoir Istanbul: Memories and the City (Knopf, 2005). Investors converted them into chic apartment buildings, cafes and restaurants as real estate prices in the country's commercial hub rose to rival London's.

    Luxury department store chain Harvey Nichols, based in London, opened an 8,000-square-meter (86,000-square-foot) branch in Istanbul in 2006. And Eczacbasi Group, a Turkish ceramics and pharmaceuticals company, took a waterside warehouse and turned it into Istanbul Modern, the country's first privately funded modern art museum, complete with an elegant bar where well-heeled Istanbulites sip California pinot noir overlooking the Bosporus Strait.

    Foreign companies also went on a buying spree in Turkey. Citigroup Inc., General Electric Co., ING Groep NV and Vodafone Plc bought Turkish banks and mobile phone companies. By the end of 2007, 9 of Turkey's 10 biggest nonstate banks had an international owner or partner, and all three mobile phone networks were majority owned by foreigners.

    Fivefold Stock Gain

    The ISE National 100 Index, Turkey's benchmark stock index, rose more than fivefold from the beginning of 2003 to the end of '07 and reached a high of 58,231.9 on Oct. 15, 2007.

    This year, the measure fell as much as 40 percent to a low of 33,208.24 on July 1 as the court battle over AKP's future scared investors away. While the market rebounded in anticipation of the party's legal victory, the wrestling between secularists and the AKP has distracted Turkey from its decades-old project of European Union membership.

    The EU says the government should do more to meet membership criteria by rescinding laws used to prosecute writers and intellectuals including Pamuk, restoring property seized from non-Muslim religious groups, allowing more competition and enforcing environmental standards.

    Erdogan's Pledge

    A day after the court ruling, Erdogan pledged to keep his government on a secular footing and the nation on the road to the EU. That would help lure back investors and keep the economy growing. In the first six months of the year, foreign direct investment fell to $7.6 billion from $12.5 billion in the same period of 2007.

    Some analysts question whether the prime minister will keep his word. Erdogan made a similar speech a year ago after his party won the general elections by a landslide. Six months later, he proposed Islam-inspired legislation, including an end to the headscarf ban for students.

    Yilmaz, for his part, hasn't responded directly to his critics. He does say the bank needs to gain the public's confidence. ``We've been defeated by inflation; there's no question about it,'' Yilmaz said in a speech to business leaders in June. ``From now on, our credibility depends on what we do. We can win it back.''

    More than the governor's reputation is at stake. Higher inflation will likely lead to the shuttering of more businesses such as those along Hosdere Street, dragging the economy down even further.


    _________________
    ปราสาทเขาพระวิหาร

      Waktu sekarang Tue Dec 06, 2016 7:46 am