Nouriel Roubini has been consistently bearish throughout the recovery. Roubini’s popularity eroded as his bearish predictions about the U.S. economy turned out wrong. Recently Nouriel Roubini was the guest on Turkey’s Bloomberg HT television and talked about the Turkish economy. Last week the Turkish Institute of Statistics announced that Turkey’s 2011 Q1 growth rate was 11%. This is even higher than China’s cooked growth rates. So Roubini’s recommendation to Turkey was to raise interest rates and control capital flows to cool down the economy. Clearly Roubini is uneducated about the Turkish economy and the figures released by the Statistics Institute. Here is why Roubini is wrong:
The Turkish Institute of Statistics calculated the 11% figure by comparing the first quarter’s GDP to the previous year’s first quarter’s GDP. This methodology doesn’t tell you what the first quarter’s (or latest) growth rate is. It gives you the average growth rate between 2010’s Q1 and 2011’s Q1. In Europe and the U.S., the growth rate is calculated by comparing 2011 Q1’s GDP to 2010 Q4’s GDP. This methodology gives the accurate growth rate for the first quarter. The Turkish economy didn’t grow by 11% during the first quarter. The Turkish economy grew by 11% during the last 9 months of 2010 and the first three months of 2011. So, the Turkish economy was really growing at an 11% rate LAST YEAR, not now. Incidentally, the Turkish Institute of Statistics started to calculate growth rates using the U.S. methodology and they publish these figures at the same time with the old figures. The dumb Turkish media still quote the figures from the old methodology, but Roubini apparently doesn’t know this. Actually the Turkish economy grew by 1.4% quarterly, or 5.7% annualized, rate during the first quarter.
Nouriel Roubini also doesn’t know that the Central Bank has been tightening aggressively by increasing the reserve ratios since the end of 2010 and the growth rate for the second quarter (using the U.S. methodology) is expected to be around 0.5% or 2% annualized. So, the Turkish economy’s growth rate RIGHT NOW isn’t 11%- it is 2%. Roubini doesn’t know this and says Turkey should raise interest rates sharply. Next time, before making uneducated guesses about Turkey, he should contact us for a couple of pointers. Otherwise his popularity in Turkey will plunge too.