Major German bank Deutsche Bank's chief economist Professor Norbert Walter spoke about recent problematic developments in world financial markets, saying a subprime mortgage crisis in the US is not the cause but rather a symptom and element of the problem, at a conference held by the Sabancı University Policy Center (IPC) in İstanbul on Friday.
A crisis in the US subprime mortgage market, in which loans made to less creditworthy borrowers were packed into securities by Wall Street firms and sold around the world, has been shaking financial markets worldwide since 2007.
Just two weeks ago the International Monetary Fund (IMF), expecting that no country would entirely escape the fallout from the crisis, cut its 2008 forecast for world growth, lowering its growth projection for this year to 4.1 percent from 4.4 percent.
"The subprime market is not the cause of worldwide financial problems; rather, it is a symptom and an element of it," Walter said, stressing that it was indeed the exaggerated credibility which had naturally made the "real estate bubble" burst.
"It will affect real estate and construction businesses as well as all related financial markets. Even general private consumption will weaken due to the reactions of banks and political authorities in the US," he stated, saying he foresees "not a recession" but a "broad slowdown" throughout 2008.
Inflation, while a worry for now, will fade into the background. The biggest risk is a disruption of the energy supply through political actions and terrorism, he says.
Turkey still doing well, but dependent
Turkey's emerging mortgage market in particular is doing well, Walter finds. He, however, does warn that Turkey is more fragile than other countries because of its high current account deficit. "Turkey will rely on external help, a move that may become expensive later on," he says.
Apart from taking into account these macroeconomic factors, investors need to know the local conditions of the real estate market very well, he says.
And we must make sure Turkey does not "disassociate from Europe and that Europe does not disassociate from Turkey," he warns, commenting that this would be a high risk, which businessmen on both sides have begun to better understand.
The conference was part of a series of events organized by the "Germany Meets Turkey: A Forum for Young Leaders (GMT)" initiative, which aims to educate, enhance and sustain German-Turkish relations by offering regular events and study tours through Turkish and German cities.
Benjamin Didszuweit, a Deutsche Bank analyst and the main organizer of the event, said he is very happy about the "good response" of the audiences that gathered at the Sabancı Center in İstanbul.
Source: SUNDAY'S ZAMAN, 24.02.2008