An economist's reputation comes from their foresight

The definitions of economist and economic expert are the same. I prefer to use the term economist rather than economic expert. One of the duties expected of economists is to make predictions about the future. By reading the economic climate of the country and the world, evaluating various data, and building mathematical and statistical models, they make forecasts for the future. 

For states, this task is undertaken by units such as Central Banks, the Ministry of Finance, and planning departments.  Universities provide guidance and produce separate, independent forecasts. Companies also carry out this work both by following those who make forecasts on behalf of the public and through experts and consultants within their own organizations.

Saying that the dollar will be 100 lira is not a forecast. The dollar might reach 100 lira. But what matters is being able to say for what reasons and when the dollar will reach 100 lira. For a forecast, it is necessary to provide a value and a time range. Saying that a large bubble has formed in the world and a major financial crisis will occur is also not a forecast. It is necessary to present when this might approximately happen, along with the justifications.  

I am not talking about sniffing out the stock market or financial markets. Sniffing out the market is one thing; predicting macro variables, primarily inflation, is another, and it carries great importance.

For an economist to be reliable, the accuracy of their predictions on issues such as economic crises, growth rates, and inflation is important. However, since economics is not a science that can be measured in a laboratory like physics or chemistry, it is heavily influenced by human behavior and internal and external political uncertainties. Therefore, it is a fact that forecasts will not always be precise and will have margins of error. For this reason, reliability comes from making mostly accurate predictions, even if there is an occasional error.

Our universities, perhaps out of fear of angering the Higher Education Council (YÖK) and the government, or perhaps out of concern that “if the predictions do not hold, they will lose their credibility,” no longer make forecasts.  

Why did I make this introduction? The Governor of the Central Bank held the final inflation report meeting of the year on Friday, November 7, along with two deputies. They raised their inflation forecasts under the guise of updating them for the fourth time this year. Forecasts can be updated according to changing conditions, but what are we to say if none of the forecasts you make hold true?

For years in Turkey, none of the forecasts made by the Central Bank, the Ministry of Finance, or the Strategic Planning Department, which prepares the Medium-Term Program, have held true, especially regarding inflation. The situation spiraled out of control, particularly with the interest rate policy based on the 'Nas' (religious decree) starting in October 2021. Inflation exploded, income and wealth distribution deteriorated, and poverty became widespread. We said the situation has been out of control since October 2021... Let's look at the economic management's inflation forecasts and actual outcomes since that date.

They started the 2022 inflation target at 11.8 percent and finished at 63.3 percent.

They started the 2023 inflation target at 22.3 percent and finished at 64.8 percent.

They started the 2024 inflation target at 33 percent and finished at 44.4 percent.

They started the 2025 inflation target at 17.5 percent, changed the target to 21 percent, and raised the target to 24 percent in the very first month. They kept 24 as the target but made a new definition called an 'actualization forecast.' They announced a new forecast saying it could be between 25 and 29 percent. That didn't hold either; finally, on November 7, they raised the forecast, stating the year would end in the 31-33 percent band.

THESE ARE MY FORECASTS TOO

For 37 years, since 1988, I have never been wrong in my inflation and growth forecasts. (1) For 35 years, my exchange rate forecasts also came true; I was wrong in my exchange rate forecasts in 2022 and 2023. For an accurate forecast, that country must be predictable. However, after the policies following October 2021, the Currency Protected Deposit (KKM) scheme, interest rate policies, and the Central Bank's back-door sales, the relationship between the exchange rate and inflation was severed. Exchange rate forecasting became impossible. For this reason, I stopped making exchange rate forecasts for 2024 and 2025. 

Starting in 2022, the Turkish Statistical Institute's (TÜİK) inflation measurement also became strange. Noticeable and measurable differences emerged between the prices we encounter in the market and TÜİK prices. Citizens are already experiencing the 'feeling' part in the markets and bazaars. I can also measure the difference by creating my own consumption basket, as well as through ENAG, which consists of independent economists. Since 2020, ENAG has been calculating its own inflation with TÜİK's basket, and I have been calculating my own inflation with my own basket since the beginning of 2022. The inflation measured by ENAG and myself went hand in hand. Koç University's household survey on inflation felt by citizens also confirmed us as a separate data set. From this, we saw that the inflation we actually experience is about twice what TÜİK announces. As such, I say that an inflation forecast cannot be made according to TÜİK's measurement, and I make forecasts according to ENAG's measurement. Unless there is a big surprise, TÜİK might be about half of this measurement. However, for the last 4 months, the gap between TÜİK inflation and ENAG has begun to narrow. I hope TÜİK gets on the right track. 

For the year 2024, my inflation forecast based on ENAG's measurement was at the 90 percent level. (December 31, 2023, 12 Punto article) Later, I revised this to the 80-85 band in my September 1, 2024, 12 Punto article. The ENAG realization was 83.4 percent. My forecast according to my own basket was also at the 90 percent level. I adjusted that forecast to the 85-90 band. The realization was 86.4 percent. The TÜİK realization was 44.4 percent, about half of what we measured. 

I also predicted the year-end 2025 inflation at 60 percent using ENAG's measurement. I wrote this forecast in 12 Punto on February 9, 2025. I also wrote that the 24 percent inflation target given by the Central Bank for the year-end would not hold even according to TÜİK, that there is sticky inflation in Turkey, and that if TÜİK does not make a big surprise, it cannot fall below 32-35 percent by year-end.  This forecast was not just mine, but the forecast of many economists. While we were making these forecasts, then-Central Bank Deputy Governor Cevdet Akçay responded from a high horse at an inflation report meeting, saying things like, “How do you know, the term sticky inflation is a superstition.” Today, at the end of October 2025, 12-month inflation is 60 percent according to ENAG... It appears that by year-end, ENAG inflation will be between 60-64 percent, and TÜİK's inflation will be 32-34 percent.

A good economist is known by the forecasts they make. Unfortunately, none of the forecasts made by the economists in the government's political and technocratic wings hold true. When diagnoses are wrong, forecasts do not hold, and implemented policies do not achieve success. Inflation does not fall. The Central Bank's inflation expectations lead to the slashing of workers' and retirees' incomes.

The relationship between the exchange rate and inflation has been severed. Due to reasons such as faulty interest rate policies and back-door sales, the price of the exchange rate began to form incorrectly. When money lost its function as a measure in both Turkish Lira and foreign currency terms, rational decisions could no longer be made in all markets, from internal trade to foreign trade, from consumers to producers and public administration. Deteriorations bordering on immorality occurred in pricing behaviors. Deteriorations in income and wealth distribution, and monopolies in markets, triggered even greater problems in every field from the economy to social life. 

(1) I will share my three memories regarding 37 years of macroeconomic forecasts involving the late Vehbi Koç, the late President Turgut Özal, and Prime Minister Tansu Çiller in another article.