There has been a lot of chatter in the mass media in the recent weeks about the goals the government is very publicly setting for itself. Top brass has two main goals for the year 2023:
How realistic are these goals?
A country’s productivity increases when it’s economy grows faster than the population that makes up that economy. Productivity is vital for an economy’s performance and long-term sustainability.
When evaluating an economy, it is important to consider the productivity of the said economy, as it would have significant implications on business prospects within that economy. That being said, how did Turkey perform in the last two decades in terms of productivity and why is it important?
Shaun Rein talks about localization in an interesting article called “Why Starbucks Succeeds in China”, focusing on how Starbucks managed to grow in the Chinese market. Not only is Starbucks growing in China, it is also enjoying handsome profit margins. How did they do it?
Chinese market is ever-so-attractive to multinational firms due to its immense size and growth prospects. Many firms such as Best Buy and Philips have failed to establish the market dominance in China, something they have been accustomed to in other countries around the world. But why can’t these companies survive in China?
Very interesting article on The Big Picture, talking about the skyrocketing balance sheets of central banks around the globe. By focusing on the eight largest central banks, the article talks about the resulting influence of central banks.
Central banks can not expand their balance sheet indefinitely, when the markets realize that the balance sheet expansion is not endless and the tide can shift direction really fast, market perspective on risk will change drastically.
Similarly, Turkey’s Central Bank (CBT) has been very hawkish on the Turkish economy in the recent period. Wherever the inflation and the Turkish Lira was concerned, CBT has a firm grasp, and has been more transparent and informative in terms of press releases, making sure that its presence is felt.
Very interesting analysis of metropolitan areas and their growth in the 2010-2011 period from our all-time favorite Brookings Institute. Please do visit their site and poke around the interactive map. It’s really cool.
When we look at the European section (above), we clearly see how three Turkish metro areas (Istanbul, Izmir and Ankara) outperformed every other European metro area in the review period. No surprise there, given the rough time Europe is having at the moment.
Similarly, Shanghai recorded the No. 1 fastest growth among the reviewed metro areas, no surprise there either..
A shocker is how Izmir and Ankara grew faster than Istanbul, in terms of income and employment, and positioned themselves as No. 4 and 6, respectively. Base effect, but still, very interesting.
Carry trade: A strategy in which an investor sells a certain currency with a relatively low interest rate and uses the funds to purchase a different currency yielding a higher interest rate. A trader using this strategy attempts to capture the difference between the rates, which can often be substantial, depending on the amount of leverage used. (Investopedia)
For years, the Japanese yen has been the de facto carry trade currency around the globe. This was due to %0 interest rates applied since 1999. Investors would borrow large amounts of money, and lend it in countries where the interest rates are high, such as Turkey. This would give them high interest with very little trouble, assuming the rates and markets stay relatively stable. On the other side, this would mean that in the high interest countries, some of the financing is denominated in, in this case, the Japanese Yen.
An interesting piece of interview on WSJ about “growth economies” featuring the Head of Goldman Sachs Asset Management. (Remember he was the guy who coined the term BRICs a decade ago.)
There are a few issues that Turkey needs to solve entering 2012 after a relatively successful 2011. The economy is estimated to have grown around 7.3% in real terms in the tumultuous environment of 2011. But the global economic conjuncture is worsening. Already, the markets argue that 2012 is actually going to be tougher than 2011. Especially for Turkey. Let’s see why.
The Lira’s volatility is one thing Turkey has to focus on immediately. Throughout the year, the Lira, parallel to other emerging market currencies, went through some rapid adjustments from its January 2011 value. For emerging market currencies, 2011 was a roller-coaster ride.
As we discussed in Bang! Bang! Pfizer Goes Down First, the Ministry of Health (MoH) has been squeezing the margins of pharmaceutical companies through price discounts, in an attempt to shrink the inflating budget and spending.
The latest discount of 7-8% in November was not welcomed by the pharma companies, to say the very least. Pharmaceutical companies like Novo Nordisk and Pfizer threatened the government not to import some of the cancer and diabetes drugs that did not have generics on the markets. As we predicted, pharmaceutical companies did not go down without a fight.
Ministry of Health (MoH) has been dictating pharmaceutical product prices at every part of the value chain, for years now. At the same time, it began financing majority of the pharma products sold for every Turkish citizen through Social Security Institution (SGK), as a result MoH’s expenses have skyrocketed from all the subsidies.
In order to stop this fast increase in expenses, MoH has discounted pharma product prices a few times in the recent years. This has direct effects on pharmaceutical companies, especially the ones that import their products from other countries, in different currencies, and sell them here, in Turkish Lira. A similar method is being used by some local regulatory bodies in China, such as Lin and Anhui. Despite being the third largest pharmaceutical market in the world (after the US and Japan, according to IMS), pharmaceutical companies in China, too, have razor thin margins, despite enormous volumes.
