With a batch of positive figures rolling in as December closed, Turkey's economy looked to be in good shape as the year 2004 began. Meanwhile, as the stock market broke its historic high, analysts seemed confident that any potential knocks in the months ahead would not do too much harm. The questions now are how to sustain this momentum - and how deep this recovery is really going.
First the figures. Turkish exports rose by 32.4% to $47.9bn in 2003, when compared to the previous year, the Turkish Exporters Assembly (TIM) announced January 2. This was higher than the government's end-of-year export target of $45.9bn, and represented a substantial improvement despite the strengthening currency, the Turkish lira. Exports rose by 51% to $4.9bn in December alone when compared to the same month of 2002.
However, TIM Chairman Oguz Satici was quick to warn that the increase in volumes had not led to a corresponding increase in profits.
"Unfortunately, we failed to earn necessary profits this year," he told reporters, adding that he hoped for better margins in the year ahead.
However, in more seasonal mood, he did then add, "Although we work on a razorblade, our country is experiencing the most secure days of the past 10 years thanks to our single-party government's fast and strong decision-making attitude."
State Minister Kursad Tuzmen was also in a good mood over the figures, and predicted that some $51.5bn in exports and $75bn in imports would be achieved in 2004.
Yet, "I believe that exporters should work to surpass $55bn in exports this year," he said. "The first step is to exceed $50bn, which is a psychological barrier in exports."
Meanwhile, more healthy figures were being announced at the Istanbul Stock Exchange (ISE), where the ISE-100 index closed 2003 at 18,625.02 points, an increase of nearly 80% on the year-end 2002 figure of 10,369.92. The rise continued into 2004, with the all-time record being broken on January 6.
The big earners during the year were Treasury papers, bank interests and repo, while traditional stalwarts gold and forex saw investors in some cases lose money. In the case of gold bullion, there was a 2.72% increase in sales during 2003, y-o-y, while in forex, the decline in profitability was mostly due to the growing strength of the lira and the global weakness of the US dollar. The lira appreciated some 17.69% against the greenback over 2003, a sustained process that few Turks have seen during their adult lives. As January 2004 opened, the US dollar's slide continued, with the psychological TL1,400,000 barrier falling early.
Meanwhile, yields on the most active January 26, 2005, debt edged up to 25.51% on the last trading day of 2003. At the end of 2002, yields on the most active debt stood at 55.72%.
Elsewhere, Turkey's inflation rate ended the year at its lowest level for 28 years, with the Consumer Price Index (CPI) at 18.4%, according to figures released by the State Statistics Institute January 4. With December's consumer inflation being just 0.9%, the CPI for 2003 was 18.4%, well down on the 29.7% of the previous year. The Wholesale Price Index (WPI) rose by 0.6% for December, bringing WPI for 2003 to 13.9%.
Again this represents a major success for the government, which had set a target of bringing the CPI below 20% by end-2003. It had also targeted 16.5% WPI. For 2004, the government hopes to bring inflation down to 12%, with the target being single digit inflation in 2005. Both look quite achievable if present trends continue.
This is, of course, in marked contrast to the predictions of gloom and disaster that were around at the start of 2002. Back then, the looming war in Iraq, followed by the Turkish parliament's rejection of US troop deployment - and consequent loss of a major US aid package - sent many market analysts into considerable depression.
Yet there are still some troubling points. While exports have climbed, so have imports. Meanwhile, as inflation has fallen, unemployment has remained a major problem. A report prepared by the union Hak-Is released at the end of the year showed that Turkey had the fourth-highest level of unemployment among OECD countries.
Following behind OECD black spots Poland, Slovakia and Spain, the report concluded some 10% of Turkey's workforce was unemployed in August 2003, the period when the study was conducted. At that time, the average unemployment rate in the OECD was 7.3%, and in the EU 8.8%.
While Prime Minister Recip Tayyip Erdogan acknowledged that this was a major problem - in fact, the biggest single problem facing the country, according to a speech on January 5, Turkey's unemployment rate for August 2003 was down slightly on the 10.6% of the previous year.
Yet clearly, what economic benefits have accrued have yet to persuade many Turkish employers that the worst is truly over and an expansion is in order. This is especially so when exporters face slight marginal profits, even though they have increasing trade volumes. It may still be some while then before Turkish businesses can relax, and the benefits of this year's hard work are more fully realised.