November industrial production, employment rate and unemployment rate data have been released. The question is: How long can politics tolerate this trend?
In the July-November period, i.e. for five consecutive months, industrial production (seasonally and calendar adjusted) has been decreasing compared to the month before. The monthly rates of change (percent) are as follows: July: -0.4; August: -0.8; September: -0.1; October: -0.3 and November: -1.4. Therefore, this is not a one-month movement; it has been going on for five months.
The unemployment rate rose by 0.4 points and the employment rate also fell. The employment rate was 48.6 percent in October and 48.2 percent in November. Monthly labor market data is very volatile. The employment rate has remained almost constant for twelve months. On the other hand, it also shows that we can only employ 48.3 percent of our working age population, but that is an ancient problem; I will skip that.
Yesterday, the World Bank’s ‘Global Economic Projections’ January 2024 Report was also published. It estimates that Turkey grew by 4.2 percent in 2023. On the other hand, the growth rate expectation for 2024 is 3.1 percent and 3.9 percent for 2025. Yes, it predicts that growth will be 1.1 percentage points lower in 2024. Moreover, it has lowered its 2024 growth forecast by 1.2 percentage points compared to the previous report – the one published in July 2023.
We have an employment rate that hasn’t increased for a year, industrial production that has been falling for five months and a low growth rate forecast for 2024. There are many people who will no doubt interpret these data as a result of interest rate hikes. In fact, as I was writing this article, such comments started to appear on social media one after the other. Are they wrong?
They are wrong, very wrong. First, if the pre-election program – I won’t call it an economic program – had continued, we would have already fallen into the abyss. The risk premium and inflation would have skyrocketed, our economy would have contracted in no time and the unemployment rate would have jumped. Because the name of that cliff would have been ‘crisis’. And in all its forms: Balance of payments crisis, financial crisis, currency crisis… Looking at it this way, we should be grateful that we did not fall into that abyss. The fact that we didn’t should be attributed to the economic program, which is obviously trying to return to rationality, even if only half-heartedly. Secondly, instead of complaining about interest rate hikes, we should point out that only raising interest rates and taxes will increase the cost of reducing inflation. “Where is the rest?” we should ask. Otherwise, it is inconceivable that politicians – especially as elections are approaching – will not be affected by criticism such as “we raised interest rates and this is what happened”. And if they are affected, it will be a pity.