Our world faced the covid-2020 nightmare in 19. Millions of people fell ill, and while the number of cases continues to increase rapidly, over a million losses continue to shake the world and all humanity. In the face of the pandemic disaster, the health of the people as well as the world economy has suffered seriously, and it is among the experts' statements that the world economy may shrink by -10% this year.
As we are in the last month of 2020, Zafer Akay, CFO of the leading technology company Canovate Group, stated that 2021 will be the year of sacrifices.
“Due to the cumulative negative effects of both this year and previous years, 2021 can be a difficult year and we can say 2021 is a year of sacrifices. Thanks to the management style to be followed in managing the cash flows of our companies, protecting and maintaining their assets in the market, smart measures to be taken by predicting negativities and the financial discipline to be applied, we can pass 2021 as a year of sacrifice. “The year 2022 will be a year in which we will see the positive rewards of these sacrifices”.
Canovate Group CFO Zafer Akay evaluated the 5 economic outlook in 2021 items and explained:
1-COVID-19 effect: As a result of the vaccination studies that will be started with the conclusion of the vaccination studies, the first places that will be positively affected will undoubtedly be the USA and Euro zone countries with high economic welfare. Thanks to our high interaction with developed countries, we anticipate that we will enter a period in which we can feel these positive developments as a country, starting from May. In summary, at the end of 2021, developed countries will have eliminated the covid-19 outbreak by 90%. Despite this positive development, it is also clear that bankruptcies and defaulted companies will experience an increase in 19, as the damage left by Covid-2020 in 2021 will be. Companies that can take action will need to manage their 2021 cash flows effectively, with a highly conservative and strict discipline.
2-Exchange rate expectation: After all the negativities in 2020, the market, which perceived positively that the Central Bank's policy rate increased by 475 basis points after the change of the Treasury and Finance Minister in the last quarter, caught the spring atmosphere. If the improvements made are supported by structural reforms, permanent improvements will be achieved. Although the Central Bank's ability to intervene in the market by selling foreign exchange decreases, the other tool that it can use has intervened in the market by increasing the interest rate. However, with new swap agreements and funding agreements to be made with large financial institutions, the Central Bank will try to expand its range of action. As a matter of fact, the short-term expectation is that the Central Bank will increase the policy rate a little further and start the real interest period on deposits, thereby curbing the upward pressure of the exchange rate. The rate of change of interest rates in both directions determines the severity of exchange rates in both directions.
3-Interest: In the light of the statements of the Minister of Treasury and Finance and the Governor of the Central Bank, that all financial instruments will be used effectively to keep the economy in balance; It can be predicted that the interest rates will go up even more and the exchange rates will come back after a certain point. Monetary policies to be applied; It is supported by political discourses and fiscal policy tools. If the implementation of these studies, the increase in interest rates and the cooling of the economy are ensured, this will lower the exchange rates, just like the exchange rate fluctuations in August 2018. As a result, high interest rates seem inevitable in 2021, according to the prediction made under today's conditions. We must take into account that we live in a dynamic world and a dynamic region and that conditions change at any moment, and we must remodel ourselves according to every day.
4-Investments: As we mentioned in the above articles, the high interest environment that will occur in 2021 with the expectation of policies to prevent exchange rate fluctuations and to give positive real interest to savings, the fact that we see the Central Bank policy interest rate close to 14,75%, maybe even higher, which is 20% as of today. It is highly probable that in this high interest environment, investors and companies can naturally reduce their direct investment expenditures. The priority of companies will be to be able to convert their own cash flows and they can reduce their investment expenditures rather than accessing the high cost resource. When the inflation and exchange rate balance is achieved, the positive contribution of the positive developments that will occur with the end of the Covid epidemic can be expected. In order to catch these positive developments, we can say that 2021 will be a year of sacrifice.
5-Inflation: As a result of the developments described above, the upward pressure on inflation may continue in 2021. We started to see this every month in the Central Bank's expectation surveys. Unfortunately, the high interest rate and rate reduction efforts and the covid-19 effect are the main actors of this effect. With the precautions and policies to be implemented above, we will be seeing downward movements on inflation with the positive developments that will occur first and then to stop this pressure.