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INTRODUCTION
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GLOBAL ECONOMY
THE GLOBAL ECONOMY CONTINUES TO EXHIBIT
SIGNS OF MODERATE RECOVERY
The global economy grew by 3.3% in 2013 and it is
expected to have grown at a similar pace in 2014,
according to the latest World Economic Outlook report
by the IMF. Higher global growth is predicted for 2015.
The GDP growth rate for the third quarter in the US was
revised to 5%, higher than the 3.9% figure announced
initially. The US economy’s 3Q 2014 growth rate
represents the highest pace of growth it has attained
since 3Q 2003. The US economy expanded by another
2.6% in 4Q 2014. The 0.9% growth in the Eurozone in
4Q 2014 was slightly higher than expected. However,
contrary to positive growth expectations, the Japanese
economy fell into recession following two consecutive
quarters of negative growth, with a contraction of 1.9%
in 3Q 2014. While Japan recorded a growth rate of 2.2%
in 4Q 2014, this was well below the expectations for
3.7% growth. The concerns regarding the sustainability
of the recovery remain. The Chinese economy closed
2014 with 7.3% growth. Although the data for the last
quarter was slightly better than expected, the Chinese
economy remains vulnerable and poses a downward risk
on global growth. The absence of an audit system in the
Chinese banking system poses a risk factor for the world’s
economies, and “shadow banking” transactions, or the
activities of non-bank financial institutions which fund
markets, have increased. These activities present a danger
to the global economy, and China has the highest level of
“shadow banking” among the leading developing markets
in the world.
Expansionary monetary policies are still
on track for the EU and Japan, while the Fed
started to implement an exit strategy from
its asset purchase program
The Federal Reserve in the US began to follow an exit
strategy in 2014, while the European and Japanese
economies continued to pursue expansionary monetary
policies. In the wake of the global financial crisis,
expansionary monetary policies were undertaken in
3.3%
The global economy
recorded 3.3% growth
in 2014.
developed countries such as the US, the EU, and Japan to
aid the recovery of these economies. Having launched its
quantitative easing program (QE3) in September 2012, the
Federal Reserve made the decision to gradually taper it
in October 29, 2014. Before these developments, starting
from the middle of the year, there were discussions about
when the Federal Reserve would hike interest rates.
Moderate growth in the US economy, in addition to a
recovery on the employment front and a moderate rise
in inflation, influenced the Fed’s decision to terminate
the quantitative easing policy. The Federal Reserve left
all interest rates unchanged at its last meeting of 2014
held on December 16-17. During the press conference
following the meeting, Fed Chairman Janet Yellen
emphasized the “patient” wording in the Fed statement
by stating that interest rates would not be raised in the
next couple of meetings. However, it is widely expected
that the Fed will start raising interest rates in 2Q 2015.
As Europe has been grappling with low inflation and
high unemployment for a long time, the ECB resolved
to maintain its expansionary monetary policy to support
economic activity. Having cut interest rates to 0.25%
at year-end 2013, the ECB further lowered the rate to
0.15% in June and to 0.05% in September. In addition,
the ECB lowered its deposit rate to below zero at its
meeting in June, declaring that it would drop to -0.10%,
signaling the adoption of a negative deposit interest rate
for the first time in its history. Low inflation rates in the
Eurozone forced the ECB to implement Targeted Longer-
Term Refinancing Operations (TLTRO), the second wave
of Longer-Term Refinancing Operations (LTRO) which was
implemented earlier in 2014. To provide more funding to
banks and to revive the EU’s economies, the ECB started
an asset-backed security purchase for the first time on
December 21. With the program set to continue for at
least two years, the ECB is planning to pump an additional
€
1 trillion into its financial system and increase its balance
sheet size, which currently stands at
€
2.1, up to its 2012
level. Furthermore, if the liquidity provided by the ECB
falls short, it stated that government bonds may also be
included in the scope of the asset purchase program.
THE WORLD AND
TURKEY IN 2014
When labor markets across the globe are examined, the unemployment
problem in the Eurozone, which has been mired in recession for a long time,
continues to stands out. In 2014, the central banks of moderately performing
world economies maintained their accommodative monetary policies.