Wednesday, 04 December 2013 16:31

Prof. Osman Cevdet Akçay, Chief Economist, Koç Financial Services


Chief Economist of Turkey’s Koç Financial Services describes Russia as “a typical single good economy” while emphasising that Brazil is still promising for investors. Answering innovaBRICS & beyond’s questions, Prof Akçay expressed his views in regards to problems faced by emerging market countries as well as BRICS.

How do you evaluate the general performance of the BRICS countries over the past few years and where does Turkey stand in comparison to these countries in terms of economic performance?

BRICS group is obviously a very eclectic group. There are four generals, if you like, namely Brazil, Russia, China and India. None of these countries resembles to another. They are all different countries. China is a thing within itself, so is India and Brazil. Turkey is probably close to Brazil in a number of ways. But I don't think you can compare any BRIC countries to any other country in the world. They are just categories by themselves. That’s the way I see them.

Three years ago, for example, at the peak of the crisis “Europe has gone down the drain and the US are struggling and thank God we have the BRICS. The BRICS are going to be the engine of growth in the world.”

Can you elaborate on the problems faced by the emerging markets?

China is having problems of its own which are very particular to China. Their growth figures are low by Chinese standards. But more importantly, China understood during the crisis that exclusively export oriented growth model is actually wrong. They suffered from not having developed a significant domestic market within China that would enable them to weather the storm better. So they hastily started taking this domestic demand because they need liability market like a hedge or a buffer against global trade shocks. But this is not an easy task. You cannot create a significant domestic market without creating an asset bubble. However, they have done a decent job so far. But it is a difficult task.

How about India?

India is also a very large country like China. Yes it is a democracy but democracies are difficult regimes and if you are that large, you also have particular difficulties of your own in terms of running your democracy. So they are encountering these kind of problems as well as   other kind of economic problems. It is a difficult case but it is a very large market and large markets are obviously very promising for the reason of their size, if nothing else. So India will stay there as a very crucial prospect. But just as I was saying in the case of Turkey in the past, you could be a great potential but remain as a potential for a very long time. I think that kind of risk is very crucial for the emerging markets.

Where would you put Russia and Brazil in this picture?

Russia is a typical single-good economy. I was in a conference last year in St Petersburg where President Putin was making a speech and he said, “We have to put an end to being a single-good economy. We have to diversify.” I think that is a challenge for Russia. But that is not so easy in today’s world because the competition is very tough.

As for Brazil, it has been obviously a huge opportunity and very promising for investors and still is, I think. It has natural resources, huge population and I think they have very sound financial system and banking system. When you talk to Brazilians, which I do very often with Brazilian hedge fund friends and economists, they say that Brazil did not utilise the last decade very well in terms of preparing for the future.