N. Y. ULCHENKO

Candidate of Economic Sciences

The impact of the global financial and economic crisis on national economies is caused by two main factors - globalization and the specifics of the country's macroeconomic policy.

Globalization, i.e. the objectively developed high degree of integration of national economies into the system of international economic relations, naturally and in a short time gave the financial and economic crisis the character of a global one.

The specifics of the macroeconomic policies adopted by national governments during the period preceding the crisis, the specifics of the development of the financial and real sectors, and the degree of their balance determined the depth of the impact of the crisis on national economies.

TURKISH ECONOMY ON THE EVE OF THE CRISIS

Following the financial and economic crisis that affected the country in 2001, Turkey entered a period of stabilization and fairly stable growth, supported by the International Monetary Fund (IMF) loan assistance (see Table 1).

Table 1

Indicators of Turkey's macroeconomic development in 2002-2007

2002

2003

2004

2005

2006

2007

GDP at current prices ($billion)

230,5

304,9

390,4

481,5

526,4

648,8

GDP growth rate calculated on the basis of 1998 prices (%)

6,2

5,3

9,4

8,4

6,9

4,5

Budget deficit / GDP (%)

-14,6

-11,3

-7,1

-1,1

-0,6

-1,6

Public debt / GDP (%)

80,0

62,2

56,6

51,1

45,5

38,9

Average annual inflation rate (wholesale prices,%)

45,0

25,3

8,6

8,1

9,6

8,7

Compiled and calculated by: TOVV. Ekonomik Rapor 2007. Ankara, 2008, s. 93, 142 - 143; ТОВВ. Ekonomik Rapor 2004. Ankara, 2005, s. 81.

The growth rate of the national economy did not fall below 4.5% for the year (2007), while its maximum value was 9.4% (2004). The budget deficit in 2007 amounted to 1.6% of gross domestic product (GDP), which was the maximum value for the last 3 years: in 2005-2006, it fluctuated around 1%, although in 2002 it exceeded 14% of GDP. The ratio of public debt to GDP fell from 80% in 2002 to 39% in 2007. The average annual inflation rate calculated on the basis of wholesale prices decreased from 45% to 8.7% over the same period1.

An important achievement of the stabilization period was the strengthening of the national banking system. Problems in its functioning began to increase in the late 1980s as the state expanded its influence on the national financial market. The main function of banks in those conditions was limited to attracting short-term loans from foreign markets and their further use for the purchase of government debt obligations. As a result, the state practically did not control the capital structure of newly created banks, and did not prevent the market entry of initially weak financial institutions with a riskily low level of equity capital.

In the late 1990s, the state began to move away from its expansionary fiscal policy, which was accompanied by a decline in the profitability of operations with government debt instruments and a narrowing of the domestic market. Banks faced the need for urgent restructuring of their operations and an increase in the volume of overdue debt. In the new conditions, the weakness of the financial structure of banks in some cases has become dangerous. As a result, by the beginning of 2001, when the currency and financial crisis broke out in Turkey, many banks had a very limited margin of stability. The country's banking system was on the verge of inevitable shocks.

Back in 1999, a special body was created - the Council for Control and Regulation of the banking system. The previously established Deposit Insurance Fund was also transferred to it, through which the Council exercised control and participation in the activities of banks. In 2001, 8 banks were transferred to the Fund, and in 2002, 3 more were transferred.

In May 2001. The Council announced a program of restructuring the Turkish banking system, which included 4 main areas::

1) restructuring of state-owned banks;

2) search for optimal solutions, including restructuring,

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for banks placed at the disposal of the Fund;

3) strengthening private banks;

4) strengthening regulation and control over the banking system.

The pace of banking system restructuring was extremely high: for example, in 2001, 7 banks were merged, 3 banks were sold, and in 2002, 5 and 2 banks were sold, respectively.The merger process, along with the revision of the conceptual principles of functioning (reduction of concessional lending programs), also affected state-owned banks.

As for the strengthening of Turkish private banks, it was also supposed to be achieved through a recapitalization program, in which, if necessary, the state was supposed to participate, and bringing the level of capital adequacy* to the necessary minimum.

Financing of measures to strengthen the structure of banks was provided through the issuance of government debt bonds in the amount of 18.5 billion rubles. euro. In addition, the Fund's own funds in the amount of 5 billion rubles were spent for the same purposes. euro 2. As a result of the removal of bankrupt banks from the market, as well as merger and consolidation, the total number of banks decreased from 61 at the end of 2001 to 46 in 2007. At the same time, over the same period, the banking system's assets grew from $118 to $484, which accounted for 66% of GDP. More recently, the unprofitable banking sector as a result of reforms began to bring steady profits. In 2007, the net profit of commercial banks was $12.3 bn3.

Against the background of positive macroeconomic trends in Turkey, the rapidly growing current account deficit of the balance of payments caused great concern. It grew from about $1.5 billion in 2002 to $37.6 billion in 2007.4

What was the reason for such a rapid increase in the deficit?

The economic growth policy pursued in Turkey in the pre-crisis period was defined by economists as " a policy of high interest rates and a low exchange rate." The Central Bank of the Republic of Turkey (CBTR) has used high interest rates as an important tool for achieving financial stabilization and controlling inflation.

High bank loan rates forced Turkish entrepreneurs to look for resources in the stock market. The Istanbul Stock Exchange actively attracted "hot money" from abroad. Its profitability for foreign investors reached 76%by the end of 2007.5 Attracted by high returns, speculative short-term capital willingly entered the Turkish market, ensuring that the Turkish lira exchange rate remained at a high level. The strengthening of the lira also contributed to the anti-inflationary policy: during 2003-2005, the national currency strengthened from 1.43 to 1.34 per $1.

But at the same time, against the background of the overvalued real exchange rate of the lira, there was a steady increase in imports, fueling the overall economic dynamics and renewing the country's need for external sources of financing.

According to some experts, the attractiveness of the Turkish financial market for foreign investors turned out to be the reverse side of positive measures to stabilize the national economy and increase the reliability of investments.

Thus, the main borrower in Turkey in recent years has been the private sector, whose short-term debt increased from $14 billion in 2001 to $37 billion in 2007, while the share of short-term debt in the total external debt of the country increased from 13% to 20%. The volume of medium-and long-term private sector debt also increased from $27 billion over the same period. its share in this type of external debt - from 26% to 50% 6. Thus, the resolution of the state debt problem occurred simultaneously with the growth of debt problems in the private sector of the country.

Part of the problem of the rapid growth of private sector debt was alleviated by the unprecedented growth of foreign direct investment (FDI): while in 2002 Turkey managed to attract less than $1 billion, in 2006 - 2007 FDI inflows reached $16.8 and $18.5 billion. respectively 7.

But, as the most prudent economists and business representatives rightly predicted, even though Turkey managed to finance such a large current account deficit at that time, this inevitably led to problems in the future.

This meant that the Turkish economy is highly sensitive to market fluctuations in the global market, which affect its behavior as a speculator.-

Table 2

Technological structure of Turkish manufacturing industry exports

Product type

1996

2000

2002

2006

High-tech industry (%)

6,6

7,8

6,2

6,0

Medium-tech (%)

20,1

40,9

47,1

55,4

Low-tech (%)

73,3

51,3

46,8

38,7

Составлено по: Preliminary National Development Plan (2004 - 2006), p. 21 -http://ekutup.dpt.gov.tr/plan/p-ndp.pdf; Ninth Development Plan (2007 - 2013), 2008 Annual Programme, p. 159 - http://ekutup.dpt.gov.tr/ program/2008i.pdf

* Capital adequacy - an indicator of the bank's performance, expressed as the ratio of the bank's own funds to the total volume of risk-weighted assets.

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both active investors and reputable credit institutions. Therefore, preventing the development of another currency and financial crisis required Turkey to introduce certain new aspects in economic policy, in particular, the growth of exports of more expensive products with higher added value*. In other words, it was necessary to solve the problem of increasing the export of high-tech products. According to official Turkish sources, in 2006 the share of high-tech products accounted for only 6% of manufacturing exports (see Table 2). However, as is often the case, there was not enough time to change the export structure in full.

IN AN UNEQUAL POSITION

Thus, the financial and real sectors of the Turkish economy found themselves in an unequal position in the face of the global financial and economic crisis: if the first sector could oppose it with a balanced system of state finances, a decrease in the level of state dependence on external sources of financing, and a largely strengthened national banking sector, the second was defenseless due to a high degree of from the external market.

Accordingly, expectations related to the crisis in these areas of the national economy were very different.

Representatives of the banking community expressed optimistic forecasts. Z. Kurtul, CEO of Akbank, one of the largest national banks, commented on the situation and highlighted 5 signs that the Turkish banking system is in good condition: sufficient capital, a broad base of deposit holders, the availability of the necessary level of liquidity, a healthy credit policy and confident management risk management. At the same time, he particularly noted the high level of capital adequacy - 17.6% with the established minimum of 12%. For comparison, in the United States, this figure was only 8% by the fall of 2008. Moreover, the Turkish banking system was also characterized by a relatively low ratio of assets to equity of banks. (For example, for Akbank, this indicator was 8, while in the banking systems of Western countries-30-40.)

As for the broad base of bank deposit holders, the Turkish banking system was characterized by a higher ratio of deposits to loans than in Western banks. The level of liquidity was also not a problem for Turkish banks. In terms of risk management, the country's banking system also performed well, with a non-performing loan rate of only 3%.

As a result, Turkey did not resort to the same measure that many Western countries turned to - raising the level of bank deposits, the safety of which was guaranteed by the state. The previously established level of 50 thousand new Turkish liras** was considered sufficient.8

Meanwhile, representatives of the Turkish business community, recognizing such an advantage of the Turkish economy as the presence of a stable banking sector, did not hide their concern about the general economic situation. Arzukhan Dogan Yalcindag, Chairman of the Association of Industrialists and Entrepreneurs of Turkey (TYUSIAD), which unites representatives of large national businesses, commented on the situation as follows: "Our banking sector is more stable than in many countries. But the world is going into a recession, and the demand for our exports is falling. Meanwhile, the Turkish private sector is heavily indebted. How will he pay? All this indicates that the recession will also affect Turkey very much... We have a significant current account deficit. Yes, oil prices have fallen, but our exports have also declined. Our main market is Europe. But look at how much it's narrowed down. This is all extremely serious. " 9 She was echoed by Mustafa Koch, Chairman of the Board of Governors of Koch Holding, one of the largest companies in the country: "Thank God, our banking system is quite reliable. But the big problem is the open currency positions of the private sector. Any difficulties in paying off debts can turn into serious difficulties. " 10

Rifat Hisarciklioglu, Chairman of the Union of Chambers of Industry and Trade Exchanges of Turkey (TOBB), another organization of large national businesses, acknowledged that the country's banking sector was in a better position compared to 2001, and drew attention to the upcoming difficulties: "If not for the previous crisis (2001 crisis - N. U.) then Turkey would probably have to face a much more dramatic scenario. Turkey may be one of the countries that will be least affected by the crisis. Most of all, it will hit economic growth, since in the conditions of a general recession, the growth of the Turkish economy is impossible. The most dangerous mistake was that foreign currency loans were used mainly by economic agents with incomes in Turkish liras. The Turkish private sector is facing $28 billion in debt repayments starting in late 2008. Under normal conditions

* Turkey produces such types of high-tech products as air and space vehicles, chemical and herbal preparations for medicinal and medical purposes, office equipment, radio and television equipment, communications equipment, medical instruments, optical devices.

** See the exchange rate of the lira below.

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This would not be a problem in the development of the economy, but in the new conditions, the lira exchange rate is becoming important. " 11

In his subsequent interviews, R. Hisarciklioglu presented a more detailed list of the main consequences of the crisis for the Turkish economy: "The crisis will manifest itself in three main areas. First, it will affect the financial market: interest rates will increase, the lira will devalue, stocks will devalue, and the flow of funds from outside will decrease. Secondly, the crisis will affect the real sector, significantly slowing down the growth rate of the economy. Finally, it will have a negative impact on public finances, reducing tax revenues and increasing interest payments on public debt. " 12

In their assessments, representatives of the country's business world polemicized with varying degrees of acuteness with Prime Minister R. T. Erdogan, who publicly spoke in October 2008 with assurances that Turkey had nothing to fear in a crisis. While understanding Erdogan's desire to prevent the growth of panic that could significantly damage the country's economy, the business community was nevertheless afraid of excessive complacency.

At the same time, journalists not without gloating recalled to Erdogan that a few months earlier, when asked whether the government had prepared a package of measures to limit the current account deficit, he said:: "In the US, the deficit reached $784 billion. And do they deal with this problem? " 13

WHAT IS THE CRISIS IN TURKEY LIKE?

The sharply reduced availability of international credit in the context of the global financial and economic crisis led to the fact that Turkey's imports in May 2009 fell by almost 44% compared to the same period in 2008. Narrowed access to imported factors of production led to a decline in the manufacturing production index: in May 2009, it fell by 19% compared to May 2008, while for the industry as a whole, the index fell by 17%. As a result, according to official statistics, GDP fell by about 14% in the first quarter of 2009. At the same time, according to official estimates, the unemployment rate reached about 15% in April 2009 compared to 10% a year ago, and there were almost 1,300 thousand more unemployed people. Among the urban population, this figure has exceeded 17%, compared to 12% in April 2008.14

The exchange rate of the lira, which was about 1.2 per $1 in July 2008, in March 2009 exceeded 1.7 liras15, although by the beginning of August it had already decreased to 1.5 liras16. The capitalization of the 100 leading companies of the Istanbul Stock Exchange decreased from $42.2 billion. in July 2008, up to $26.1 billion. by the end of January 2009 17

HOW TO OVERCOME THE CRISIS?

What measures have been taken by the Government to deal with the crisis?

As is often the case in today's Turkey, they largely met the wishes and expectations of the business community, which unites the most influential economic agents. Back in October 2008, when assessing the situation in the country, representatives of Turkish business began to actively speak out in favor of concluding a new, "preventive" agreement with the IMF. In May 2008, the last of the three stabilization loan agreements concluded with the Fund since the late 1990s expired.The idea of concluding a new agreement was supported by both representatives of the more prosperous banking sector and entrepreneurs operating in the real sector.

The reason for such a unanimous commitment of the business community to the idea of resuming cooperation with the Fund is the desire to increase the attractiveness of the Turkish market for foreign investors, to ease the severity of the balance of payments problem with the help of the IMF and to stabilize the exchange rate.

Discussing the prospects of the economy, the Turkish newspaper Milliyet wrote:: "Where will Turkey find $27 billion in 2009? for debt repayments? That's the whole question. Hence the need for IMF assistance. If this money is not found, the lira will continue to weaken. At the same time, there will be a rapid drop in national income, an increase in unemployment, and an increase in the import "collapse" syndrome. Of course, in the long run, the emergence of such a situation and its independent overcoming could bring positive results. But what authority will take responsibility for this?"18 " The Turkish people, business people feel the crisis through the exchange rate... For us, stability means the stability of the lira exchange rate. The immediate effect of the agreement with the IMF will be to ease the pressure on the national currency exchange rate and stabilize it,"Milliet noted.19

But the ruling Justice and Development Party (AKP) has entered a long-awaited period of independent economic policy since the end of its agreements with the IMF in May 2008. Despite the fact that Turkey still owes the IMF old loans, before the crisis, the authorities planned to refrain from attracting new loans. This is probably why R. T. Erdogan allowed himself to emphasize in several public statements that he is not interested in further cooperation with the IMF, which forces the government to pursue a more stringent fiscal policy. Under the influence of business circles, a statement by the Chairman of the Central Bank, D. Yilmaz, followed, in which, although in a mild form,

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It also called for continued cooperation with the Fund: "The Republic of Turkey itself does not need the Fund's money. But we don't know what awaits us. Therefore, it would be useful to find forms of cooperation that would increase the confidence of the international financial market. " 20

In January 2009, Yilmaz made a statement about the feasibility of preparing a new letter of intent containing the Turkish government's economic program, which can be approved by the IMF. As he noted, the most problematic points of the negotiations are economic growth and fiscal policy. But the process of agreeing the terms of a new loan with the IMF is slow.

As the first estimates of the 2008 macroeconomic results showed, the budget deficit increased by at least 25% compared to the previous year 2007, which meant that the primary budget surplus (i.e., the budget in which expenditure items do not take into account public debt servicing payments) decreased by 4%. Such a budget outcome could only mean the inevitable demands of the IMF for further and immediate cuts in public spending.

Meanwhile, the crisis, and especially the local elections that took place in March 2009, required prompt anti-crisis measures.

R. T. Erdogan personally announced the contents of the anti-crisis package at a pre-election rally on March 14, 2009. And although, according to Deputy Prime Minister N. Erken, the government's anti-crisis measures should not lead to a violation of financial discipline, the measures proposed by the Prime Minister hardly allowed us to hope that their application would not become an additional burden for the budget.

The main task of the Government was to revive domestic demand. To this end, the government announced an increase in the capital of Eximbank, which is engaged in lending to foreign trade operations, by $400 million. To provide small and medium-sized businesses (SMEs) with affordable loans, the budget of the specialized organization for SME support (KOSGEB) increased by $60 million.

In order to revive the construction sector, the value-added tax levied on new housing purchases was reduced from 18% to 8%. In order to support the automotive and household appliances industries most affected by the crisis and increase demand for their products in the domestic market, the special consumer tax rate levied on the purchase of these goods was planned to be kept at a lower level.21 Some economists estimate that the special consumer tax rate on consumer electronics could fall from 6.7% to 1% .22

Erken estimated the cost of the anti-crisis package at 5.5 billion liras. It is obvious that the announcement of such measures, which is appropriate for political purposes, could not be a favorable background for starting negotiations with the IMF. Therefore, the official representative of the fund said that the IMF delegation will be ready to continue negotiations only after the March elections.

Certain measures were also taken by the CBTR. First, at the end of January 2009, the Central Bank reminded about its right to extend credit to banks whose situation is considered unstable or unsafe. Using this right, the Central Bank of Russia announced the possibility of providing a loan to banks in need for a period of up to 1 year and in an amount not exceeding double the size of the bank's own sources. This measure suggests that due to the depth and duration of the crisis, not all Turkish banks will be able to survive it without losses. Second, like the banks of Western countries, the Central Bank has repeatedly announced a reduction in interest rates on one-day loans since November 200823. As a result, the annual rate decreased from 16.75% in October 2008 to 11.50% in February and to 10.5% in March 2009.24 Thus, the CBTR seems to have abandoned its previous anti-inflationary credo. However, according to the bank's management, the continued decline in economic activity is itself a factor in curbing inflation, which made it possible to change the vector of interest rate policy.

what's next?

If we talk about economic forecasts, the initial expectations of GDP growth in Turkey by the end of 2009 were replaced by a forecast of its decline. According to the forecast of the International Financial Institute published in May 2009, by the end of the year, the pro --

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production in Turkey will be 7.5%25. Negative growth rates are also projected for 2010.

How plausible the gloomy scenarios turn out to be depends on the progress of negotiations with the IMF on concluding a new loan agreement, which continued after the municipal elections. At the same time, it is not the fact of concluding an agreement that is critically important, which is apparently a foregone conclusion, but its terms.

State Minister M. Szymsek said that Turkey's interests should be taken into account when concluding agreements with the IMF. According to him, the fund requires Turkey to reduce costs and increase revenues, which is correct in the medium term, but is a mistake in the current unfavorable market conditions. The government's position on this issue was also clarified by Erdogan himself, emphasizing that in conditions when the unemployment rate in the country has exceeded 16% and the investment process needs to be maintained in order to create jobs, proposals to curb economic growth and increase government revenues cannot be considered.

According to the Prime Minister, in the context of falling oil prices, the current account deficit has reached its lowest level in the last 7 years. Therefore, there is no need for external financing to cover the current account deficit, but the IMF funds are needed to finance the budget deficits26. This refers to its expected growth against the background of an active anti-crisis policy aimed at mitigating the recession.

Thus, the efforts of Turkish leaders are aimed at convincing the IMF to abandon the basic principles of lending to national economies. So that the Fund's funds can be used not only for long-term measures to strengthen the macroeconomic balance (the Fund insists on maintaining the primary budget surplus of 0.5% of GDP planned for 2009 and implementing subsequent financial reforms as a precondition for allocating funds), but also for urgent anti-crisis measures.

As a result, in the post-election period, a stalemate emerged in Turkey's negotiations with the IMF: the Fund, as a condition for allocating funds, requires resolving the situation in the field of public finances, for which, in the current situation, the government primarily needs the Fund's funds.

For the ruling AKP, whose rating has slightly declined following the results of the last election, the primary problem is to mitigate the manifestations of the crisis for ordinary citizens.

But it is unlikely that the Fund will agree to lend not so much to the long-term prospects for stable development of Turkey, but rather to its accelerated transition to the phase of economic growth.

The country's business community also has doubts about the government's intentions to change the direction of using IMF loans. Representatives of the business community have already rightly assessed the government's anti-crisis measures as "putting out a fire", meaning that they are subordinated to the interests of the ruling party in the pre-election struggle. They stressed that Turkey should resort to more fundamental actions of a medium - and long-term nature: controlled, but at the same time ensuring demand growth, monetary and fiscal policies, measures to improve the efficiency and competitiveness of the economy, and improve the business and investment environment.27

Otherwise, if the Turkish authorities reach an agreement with the IMF to bring the world economy out of the crisis and restore the international credit market, there is a possibility of a return to the pre - crisis scenario-the activation of private sector borrowing activities in conditions when public finances remain under the Fund's control.

To prevent the development of such a scenario, some Turkish economists suggest extending controls (similar to those applied to the level of capital adequacy of banks) to the activities of real sector firms, limiting the level of their loans to a certain share of equity. In other words, we are talking about forcing local producers to increase efficiency while reducing the availability of external loans.

In other words, as for many national economies, the most important question for Turkey is whether, after the end of the global crisis, it only seeks to return to the previous scheme of interaction with the world economy, or whether it will try to increase its stability as a serious player in the global economy.

1 Turkey: Economic Reform and Accession to the European Union. Wash., 2005, p. 163 - 164.

2 Turkiye Bankalar Birligi. Bankalarimiz 2007. Istanbul, 2008, s. 1 - 33, 1 - 42.

3 See: TOBB. Ekonomik Rapor 2007, s. 143.

4 Milliyet, 4.11.2007.

5 Calculated from: Ekonomik Rapor 2007, s. 121.

6 Ibid., s. 115.

7 Hurriyet, 09.10.2008.

8 Milliyet, 10.10.2008.

9 Ibidem.

10 Millivet, 09.10.2008.

11 Milliyet, 10.10.2008.

12 Hurriyet, 09.10.2008.

13 Website of the State Planning Organization - www.tuik/gov.tr/SagMenu?guncel/guncel.xml

14 Website of the Central Bank of the Republic of Turkey - http://evds.tcmb.gov.tr/cgibin/famecgi

15 Ibidem.

16 Mali Piyasalarda Gelismeler. Subat, 2009 - http://www.dpt.gov.tr/

17 Milliyet, 14.11.2008.

18 Milliyet, 23.01.2009.

19 Milliyet, 28.10.2008.

20 The minimum tax rate for buying a car is 37%.

21 Milliyet, 14.03.2009.

22 One-day settlement loans provided by the Central Bank for settlement at the end of the business day.

23 Para Politikasi Kurulu Karari, 19.03.2009 - www.tcmb.gov.tr

24 Milliyet, 19.05.2009.

25 Ibidem.

26 See, for example, Milliyet, 01.04.2009.

Ozturk I 27. IMF ile anlasmak // Zaman, 09.10.2008.

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