The rise in the dollar exchange rate also changed the national income accounts. The calculations made in the Medium-Term Program for the period 2022-2024, announced by the government in September last year, were based on the assumption that the average dollar rate this year would be 9.27.
Estimating that Turkey will grow by 5 percent this year, the economy management has predicted that the gross domestic product (GDP) would be 7 trillion Turkish lira 880 billion and $ 850 billion in dollars. By the same calculation, the projection of per capita GDP was $ 9,947.
Goals not achieved
The exchange rate of the dollar, which started the year at 13.4 lire, however, has exceeded the level of 17.20 with an increase of 28 per cent since the beginning of the year. As a result, the average annual exchange rate reached the level of 14.51.
The calculations made for this year in the medium-term program were surprised by the increase in exchange rates. Calculated from the average exchange rate achieved this year, Turkey’s national income drops to $ 543 billion due to the exchange difference alone. The per capita income, on the other hand, drops to 6 thousand 354 dollars.
As a result, if the management of the economy does not take a step by the end of the year, Turkey, which has been impoverished by $ 3,000 593 per person, loses on paper $ 307 billion from its national income.
On the other hand, this calculation is based on the assumption that the 5 percent growth target set by the government this year is met and that the exchange rate does not break new records.
Although the government has set a 5 percent growth target for this year, the 2022 growth expectation was 3.3 percent in the Central Bank’s May expectations survey of 48 participants, consisting of representatives and professionals from the real and financial sector.
Growth projections are low
International organizations’ 2022 growth forecasts for Turkey are also lower than the government’s annual forecasts.
The Organization for Economic Co-operation and Development (OECD), in its “Economic Outlook” report published on June 8, announced that its 2022 GDP growth forecast for Turkey is 3.7%. The OECD has estimated that high inflation and falling consumer confidence will limit consumer spending, while investments will be adversely affected by geopolitical factors and uncertain financial conditions.
The International Monetary Fund (IMF) recently cut its growth forecast for Turkey from 3.3% to 2.7% in April. While the growth expectation announced by the international rating agency Moody’s in May is 3.5 percent, the World Bank’s growth forecast remains at 2.3 percent.
Currency forecasts rise
Exchange rate forecasts are on the upside. British Standard Chartered Bank, which is working on a dollar / TL valuation, raised its 2022 year-end exchange rate forecast from 12 to 20 in its report released in January. UK-based HSBC raised its year-end forecast for USD / TL from 16.5 to 17.5 in May, while Italian bank Unicredit’s forecast was 18.
According to the Central Bank’s May Market Participants Survey, the year-end dollar / TL expectation of participants is 17.57.
Economists are of the view that avoiding interest rate hikes, which is one of the effective tools of monetary policy to halt the rise in exchange rates and inflation in Turkey, hurt confidence in the economy during the period. which the central banks of the world were planning to raise interest rates. Consequently, while the tools used by management of the economy instead of raising interest rates offer a temporary solution, investors are turning to safe-haven assets and the exchange rate hike is accelerating.
contraction in dollar terms
Existing data also shows that while Turkey’s national income is increasing in TL terms, it is melting in dollar terms. This, in turn, could cause Turkey, which was the 21st largest economy in the world last year, to drop to its lowest levels.
According to official data, Turkey recorded 7.3% growth in TL terms in the first quarter of the year, while it shrank by 4.9% in dollar terms. National per capita income fell from $ 9,000 539 to $ 9,000 374. Internationally, $ 10,000 is accepted as a psychological limit for per capita income. Per capita income in Turkey has been less than $ 10,000 since 2018.
78th for per capita income
One of the AKP government’s biggest claims has been to make Turkey one of the top 10 economies in 2023, the 100th anniversary of the Republic. However, Turkey, which was the 16th largest economy in the world in 2015, fell to 21st, among the top 20 economies with a GDP of $ 806.8 billion last year, according to the IMF’s April report. . According to the same report, while Turkey was 66th in 2015 in terms of per capita income, in 2021 it dropped to 78th place.
In its report announced in April, the Fund predicted that Turkey would regress to 23rd place with a national income of $ 692.4 billion this year. On the other hand, even if the GDP of other countries is thought not to increase, it is possible that Turkey will drop to lower levels due to the trend in exchange rates.