Economists criticize government’s inaction
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by Ekrem Ekici
Oluşturulma Tarihi: Aralık 12, 2008 00:00
ISTANBUL - The current fragile situation of the Turkish economy has nothing to do with the ratings given by international credit rating agencies, economists say, criticizing a government minister’s approach. Zafer Çağlayan, the Minister of Industry and Trade, had said the credentials of global rating agencies are flawed.
As Turkey’s leaders lose their confidence in credit rating agencies in the wake of the global financial crisis, a government minister has invoked a new debate on what these agencies say about Turkey.
Responding to a statement by Kristin Lindow, senior vice president of Moody's Investors Service Risk Unit, Zafer Çağlayan, Turkey’s minister of industry and trade, said last week that "if these institutions [like Moody's] had given the right advice and had led people properly, we probably would not have experienced... a devastating crisis.
"The trustworthiness of ... rating agencies should be questioned," Çağlayan said. The comment came after Lindow’s claims that the absence of an International Monetary Fund deal would result in recession.
Speaking to the Hürriyet Daily News & Economic Review, economists said agencies’ assesment of Turkey has nothing to do with the perceived erosion in credibility.
Failure ’not about Turkey’
Credit rating agencies were already discredited due to "false forecasts" on the Asian crisis in 1997, Mahfi Eğilmez, an economist at Bilgi University, told the Daily News. "They also failed in assessing the current global financial crisis. Lehman Brothers had been rated AA+ just before it went bankrupt. They failed again," he added.
"But this does not mean that every word they say on Turkey is wrong. The Moody’s statement on Turkey sounds right," said Eğilmez. "Turkey’s economy would enter into recession whether there is an IMF deal in place or not. Growth will most likely be negative next year. It is a necessity for the government to think before reacting."
Sharing a similar perspective, Gazi Erçel, former president of the Central Bank, said the credibility of credit rating agencies may be questioned but they seemed to be saying the right things about Turkey.
"Turkey’s gross foreign exchange need ranges between $120 and $130 billion. The economy will seriously be impacted if this need cannot be met," Erçel said. "It is true that credit rating agencies are facing a credibility problem but that has nothing to do with their assessments on Turkey."
The government sees no problem "when such agencies speak positively," economist Mustafa Sönmez noted. "Crisis assessments by these institutions are arguable, but Turkey will face a recession whether there is an IMF deal or not."
"We do not have to be Moody’s to say that there is a recession coming. It is enough to look at the data," Sönmez said.
There is no point discussing the reputation of credit rating agencies and the focus should be on what has been said, Uğur Gürses, a columnist at Radikal newspaper, told the Daily News. "Turkey’s economy is slowing down. There is a rapid contraction in consumption,"he said. "Third quarter growth will be almost negative. But growth will definitely be negative in the fourth quarter. Maybe we are already in recession, but ministers are not aware."
"I share Minister Çağlayan’s opinion on the lack of credibility of credit rating agencies," said economist Uğur Civelek. "[These agencies] missed many developments after 1995, such as the Asian crisis of 1997," he told the Daily News.
"They have completed their mission. They have supported unsustainable tendencies, overrated toxic bonds and could not foresee the global crisis,"he continued."The world’s financial architecture is changing. Turkey cannot solve its problems with its own precautions and the IMF cannot help either."
Responding to a statement by Kristin Lindow, senior vice president of Moody's Investors Service Risk Unit, Zafer Çağlayan, Turkey’s minister of industry and trade, said last week that "if these institutions [like Moody's] had given the right advice and had led people properly, we probably would not have experienced... a devastating crisis.
"The trustworthiness of ... rating agencies should be questioned," Çağlayan said. The comment came after Lindow’s claims that the absence of an International Monetary Fund deal would result in recession.
Speaking to the Hürriyet Daily News & Economic Review, economists said agencies’ assesment of Turkey has nothing to do with the perceived erosion in credibility.
Failure ’not about Turkey’
Credit rating agencies were already discredited due to "false forecasts" on the Asian crisis in 1997, Mahfi Eğilmez, an economist at Bilgi University, told the Daily News. "They also failed in assessing the current global financial crisis. Lehman Brothers had been rated AA+ just before it went bankrupt. They failed again," he added.
"But this does not mean that every word they say on Turkey is wrong. The Moody’s statement on Turkey sounds right," said Eğilmez. "Turkey’s economy would enter into recession whether there is an IMF deal in place or not. Growth will most likely be negative next year. It is a necessity for the government to think before reacting."
Sharing a similar perspective, Gazi Erçel, former president of the Central Bank, said the credibility of credit rating agencies may be questioned but they seemed to be saying the right things about Turkey.
"Turkey’s gross foreign exchange need ranges between $120 and $130 billion. The economy will seriously be impacted if this need cannot be met," Erçel said. "It is true that credit rating agencies are facing a credibility problem but that has nothing to do with their assessments on Turkey."
The government sees no problem "when such agencies speak positively," economist Mustafa Sönmez noted. "Crisis assessments by these institutions are arguable, but Turkey will face a recession whether there is an IMF deal or not."
"We do not have to be Moody’s to say that there is a recession coming. It is enough to look at the data," Sönmez said.
There is no point discussing the reputation of credit rating agencies and the focus should be on what has been said, Uğur Gürses, a columnist at Radikal newspaper, told the Daily News. "Turkey’s economy is slowing down. There is a rapid contraction in consumption,"he said. "Third quarter growth will be almost negative. But growth will definitely be negative in the fourth quarter. Maybe we are already in recession, but ministers are not aware."
"I share Minister Çağlayan’s opinion on the lack of credibility of credit rating agencies," said economist Uğur Civelek. "[These agencies] missed many developments after 1995, such as the Asian crisis of 1997," he told the Daily News.
"They have completed their mission. They have supported unsustainable tendencies, overrated toxic bonds and could not foresee the global crisis,"he continued."The world’s financial architecture is changing. Turkey cannot solve its problems with its own precautions and the IMF cannot help either."