The Great Recession and Developing Countries
In an effort to contain inflation expectations, the CBRT raised interest rates by 425 basis points in June 2006. Confidence fell and private fixed investment subsequently slowed (figures 11.10 and 11.11). Moreover, capital inflows financed a growing import bill attributed to higher commodity prices and, to some degree, went into financial assets rather than new fixed assets. The next two years—2007 and early 2008—were a period of political and economic uncertainty: Figure 11.11. Confidence Indexes and Capital Account after 2006 a. Confidence indexes 120 110 100 90 80 70 60 50
Jan M 07 ar M 07 ay -0 Ju 7 l-0 Se 7 pNo 07 vJan 07 M 08 ar -0 M 8 ay -0 Ju 8 l-0 Se 8 pNo 08 vJan 08 M 09 ar M 09 ay -0 Ju 9 l-0 Se 9 pNo 09 v09
40
CNBC-e consumer confidence CBRT consumer confidence
CBRT real sector confidence
b. Capital account 35 30 25 20 15 10 5 0 –5 –10 –15
Jan -0 7 Ap r-0 7 Ju l-0 7 O ct -0 7 Jan -0 8 Ap r-0 8 Ju l-0 8 O ct -0 8 Jan -0 9 Ap r-0 9 Ju l-0 9 O ct -0 9
US$ billions
512
portfolio Source: TurkStat.
FDI
banks
nonbank