Tensions soothe as Nov 1 approaches

The title above is confusing as the usual. The Nov. 1 general elections are critically important for the four parties which will stand for the election and wish to form groups in the Turkish National Grand Assembly and the political race is and will be rough and cut-throat. On the other hand, toward Nov. 1, on some economic and political titles that would make the election atmosphere more adrenalized, the tension will soothe over. For example, if the U.S. Central Bank (FED) takes a decision to increase the interest rate in the meeting on Oct. 27-28, if the markets strongly feel this possibility before the meeting, the week we will have the Nov. 1 general elections, there will be a serious fluctuation in the currency exchange rates. Any disturbance and unpleasantness that will result from this development in the business world and economy circles will have a certain effect on the general elections as well.

However, late Thursday on Oct. 8, the meeting minutes of FED's Federal Open Market Committee (FOMC) which were announced at a late time, even if FED authorities were happy with the general performance of the U.S. economy, it showed that they preferred to follow the increasing concerns on the global economic system due to the slowdown in its growth or the slowdown in Chinese economy.

In fact, they want to see the affects of the severe value increase which has been observed for the last four months in the U.S.'s export performance.

Also, they have been preferring to observe the impact of the slowdown in Chinese economy on U.S. economy. That's why, the probability of FED's increasing the interest rates in the meeting in October has almost vanished.

Will terrorism end?

FED's meeting minutes in September show that, besides the meeting at the end of October this year, even in the last meeting of the year in December, there will be no increase in interest rates and with a strengthening expectation that the decision for the interest rate increase will most likely be in 2016, the U.S. dollar lost value against the currencies of prominent developed and developing countries; as the euro attacked the U.S. dollar toward US$1.14, and after that while calming down on the US$1.1350 level, as the dollar-TL exchange rate regressed to the TL 2.89 level, it calmed down around TL 2.90.

Yet a few weeks ago, at even TL 3.0750, as the dollar-TL exchange rate that caused the real sector and banking circles to feel highly blue, closed last week on Friday at TL 3.03 level, yesterday, while this week was closing, it is hopeful that it will wind down to TL 2.90.

As the currencies of prominent countries lost severe value against the U.S. dollar, now because of the reduction of stress, it is important that the Turkish Lira will take its share from the exchange rate move to compensate these losses.

At this stage, with the other critical issues surfacing, in case the optimism observed in the market continues, the dollar-TL exchange rate will drop to about TL 2.82-2.78. Well, what could be another reason for this?

Of course, ending terror. At this point, for the last few days, the speeches indicating that the terror organization will declare a cease-fire and the guns will be silenced until the Nov. 1 elections, politicians beginning to give more precise messages on this issue, could again be observed as a morale boosting development for economy circles.

Growth may surprise as well

Among the reasons of the optimistic atmosphere, we talked about FED and the likelihood of terror coming to a halt.

Along with these headlines, another effective headline seems to be the industrial production data of August that was announced Thursday on Oct. 8.

The announced data's indicating that in August the industrial production had increased 7.2 percent compared to the same month of the previous year, surprised the markets.

In this case, if we remember that in September of last year, industrial production showed good performance and with the effect of the festive holiday even if we assume that there may be a little performance decrease in the industrial production, the industrial production could have a minimum increase between 2.5 percent to 3 percent in the third quarter.

This means, in the third quarter, the Turkish economy will have grown at least 2.3 percent, similar to the first quarter of this year.

But, I will clarify my estimation on this issue after the announcement of the industrial production data of September on Monday, Nov. 9.

At this point, with the possibility that the production performance will be better in the last quarter of the year, right now we can say it shouldn't be neglected that with a growth of almost 3 percent, the Turkish economy will complete year 2015 slightly better than the year 2014.

Also the markets are soothing the tension by taking into consideration the positive growth number. The growth prediction of the International Monetary Fund (IMF) for the Turkish economy is 3 percent for 2015.

When it is considered that the IMF's growth prediction for many developing and pioneering economies are quite bad, average growth predictions for Latin America and Eastern Europe are quite low, it can be a consolation for Turkey to complete the year 2015 with a growth of 3 percent.