Global Investing

Melancholia, social class and GDP forecasts in Turkey

February 6, 2012

An interesting take on GDP stats and those who make the predictions. An analysis of economic growth forecasts for several emerging markets over 2006-2010 has led Renaissance Capital economist Mert Yildiz to conclude that analysts of Turkish origin (and he is one) tend to be: 

a) far more pessimistic about their country’s economic growth outlook than the foreigners, and 

b) more pessimistic than economists from Poland, Russia, India or China are about their respective countries.

In fact, in each of these countries, foreigners provided more optimistic GDP forecasts than the locals, Yildiz found. What is surprising about Turkey is the extent to which local analysts have tended to underestimate growth — the figure below shows an average deviation of minus 1.7. In Russia, locals’ deviation was second-largest at minus 0.5.

Yildiz comes up with several explanations, including a very attractive one about the inherently pessimistic nature of Turks as a people.

“Huzun” or gloom is an integral part of Turkish culture, he says of the feeling of  melancholia that permeate the novels of Orhan Pamuk. 

 Turkish music, dominated by dirges lamenting lovers’ heartbreak, is “the best indicator of our collective huzun,” he says.  

A less romantic explanation may lie in the socio-economic background of most Turkish analysts. For the most part they tend to be  (Yildiz notes) part of the country’s upper-middle class secular elite. These folks do not generally vote for the Islamist-rooted AK Party that has led the country for a decade (and is generally acknowledged to have done an excellent job). Yildiz writes:

Deep down we suspect some may harbour ambitions to see their party of choice in power, or least AKP out of power. Wishful thinking may be affecting their judgement of the economy.

He adds however:

As much as an outsider’s opinion is always welcome, natives of a country clearly often understand their country better than non-natives.

But Yildiz’s findings haven’t led him to reassess his forecast for Turkey’s growth in 2012. He predicts the economy will grow 1.3 percent –lower than the average forecast by Turkish economists and almost half the average “foreign” prediction of 2 percent. There is however one influential non-Turkish forecaster that is even more bearish than Yildiz this year – the International Monetary Fund sees Turkey’s economy growing by just 0.4 percent  in 2012.

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