Turkey Grows and Grows

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One of the few real IMF success stories, the Turkish economy continues with what Serhan Cevik calls its spectacular normality:

The Turkish economy is now in its fourth year of uninterrupted growth, with an average real GDP growth rate of 7.5% per annum. Indeed, the trend growth rate surged from 3.9% in the 1990s to 5.8% in the post-crisis period and to an impressive 7.8% last year. And we project 7.2% growth for Turkey in 2005 and 6.8% next year, compared with average OECD growth rates of 2.6% and 2.8%, respectively. Obviously, this is an unusual performance for a country that had long failed to keep the economy close to its potential on a sustainable basis. In fact, the growth rate of real per capita GDP decelerated from 2.3% per annum in the 1970s to 1.7% in the 1980s and then to 1.3% in the 1990s leading to the 2001 crisis. However, with prudent fiscal and monetary policies and structural reforms, real per capita income increased by 18.9% on a cumulative basis in the last three years, and should remain on an above-trend growth trajectory in the coming years.

Quinquireme of Nineveh

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Globalisation, of course, isn’t a new phenomenon. Those who have been following my demographic material will not be surprised that the role of migration in human history is a topic which fascinates me. Well, Juan Cole has a very ‘informed’ post today about a piece of genetic research which claims to show that half of the inhabitants of Madagascar come from Borneo, while the other half derive from East Africa.

Those who want to learn more about all this could do worse than try some Cavalli_Sforza. ‘Luigi’ is undoubtedly the ‘grand-father’ of the current attempts to fuse archaelogy, linguistics and genetics. Many of the papers on site at his Stanford based Human Population Genetics Laboratory make very interesting reading.

Full disclosure: reading C-S was one of the things which really started me off thinking about all those ‘demographic issues’.

Finland Proposes

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The Finnish government intend to push for an eco-efficient European economy when Finland assumes the EU Presidency in the second half of 2006.The inspiration will be the national Finnish programme for sustainable consumption and production. Back in 2002 the EU committed itself, during the Johannesburg Earth summit, to establish a ten-year framework programme for sustainable consumption and production, to date little has come of this.

Poland Cancels Referendum

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Poland is now the seventh country to suspend its referendum plans. Denmark, Portugal, Sweden, Finland, Ireland and the Czech Republic have already done so. Portugal has ammended its constitution to make it possible to hold a referendum on EU related matters, but evidently there are no plans to hold any in the foreseeable future. Germany, I think, is still awaiting a judicial ruling on this topic.

Just A Fairy Story?

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Or a real possibility: the euro at 1:1 with the dollar? The FT today cites one trader who thinks it a definite possibility. Of course, they also often quote others who hold a contrary opinion. So why do I pick up on this one? Because even though I don’t have access to the technical and currency market info, it fits in with my general reading of the respective underlying ‘macro’, and the way things could well evolve. Certainly the euro has been resisting strongly the push under the $1.20, and continually recovers ground lost. What you can say is that there is a lot of ‘volatility’ out there.

Paul Chertkow, head of global currency research at Bank of Tokyo-Mitsubishi, said a fresh impetus was needed to re-test the downside of the euros recent range, at $1.2020.

However, Mr Chertkow believes there are around $1bn worth of options in place below the $1.20 level, which could cause the euro to slide precipitously if triggered. We would have real panic, he says.

In this eventuality Mr Chertkow sees scope for the euro to fall as far as $1.10, or potentially, even parity against the dollar, led by euro-selling by US companies. American corporates have insufficient hedging ratios to protect a move on the downside through $1.20, he said. This would cause American corporates to capitulate.

Sweden Acts On Interest Rates

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Well Sweden has just put the cat among the pigeons. Taking advantage of its ability to apply an independent monetary policy, the Riksbank has decided to cut its base lending rate from 2.0% to 1.5%. The reason why is not hard to discern, apart from the reduced growth forecast for this year, the inflation rate is falling dangerously low, at just 0.2% year on year in May, dropping from a 0.4% y-oy in April and 0.5% y-o-y in March. Obviously Sweden is on deflation alert, and in fact a greater reduction (say 1%) might have been justified.

This is bound to spark all sorts of additional debate about the euro, and its advisability. Finland would be the best point of comparison here. The Finnish inflation rate was 0.6% y-o-y in May, but it has been hovering precariously near the zero level for the last month, anything which gave a sudden push to the disinflation process, like a sudden bust in commodity prices, would certainly clearly knock Finland over the line.
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75m French People

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At 75 million, France is projected to have the largest population in the EU (of current members) by 2050, according to French government figures. France’s baby-friendly policies, plus reasonably large immigration seems behind the projected increase (the country’s population is now just over 60 million). By contrast Germany’s population is set to fall to 72m, around 8m less than at present.
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Germans Cut Back On Credit

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This news to the effect that German consumers actually reduced their outstanding debt is deeply significant in my view. What it reflects is what needs to be analysed:

“German private households ignored the attractions of historically-low interest rates and for the first time paid back more money than they borrowed last year.

The net credit repayment reported by the Bundesbank, Germany’s central bank, on Monday reflected the high level of consumer insecurity in Europe’s largest economy. It contrasted with the strong credit growth in other European countries, which has boosted consumer spending.

?There is nowhere else where a country comes even close to such weak growth rates,? said Julian Callow, economist at Barclays Capital.“