2019 will be bright year for Turkish economy, says Albayrak

DAVOS

The Turkish economy is showing signs of soft landing in line with the government’s strategy, Treasury and Finance Minister Berat Albayrak has said, adding that 2019 will be a promising year for the economy.

“This is going like how we have planned. So far so good. The crucial stuff here is Turkey is going to be very much aligned with a very quality-based growth. There has to be some slowing down. This is soft landing strategy,” Albayrak told Bloomberg Television in an interview on Jan. 24 at the World Economic Forum in Davos.

The minister, who once again dismissed speculations that the Turkish economy may experience recession in the fourth quarter, acknowledged that there will be a “significant slowdown,” however this will not amount to a recession.

“The thing is we’re pushing very hard [to make sure] that it has to be for soft-landing purposes. So it’s very much on track,” he said, adding that the government’s main focus is not having big growth but a quality growth.

Albayrak reiterated that the government’s 2.3 percent GDP growth target set for 2019 will be met.

The minister underlined that following the June 2018 elections, the government has focused on three vulnerabilities: Budget discipline, fighting inflation and current-account deficit strategy.

“In the last six months we have had a very strong execution of all of these three,” he said, noting that the budget deficit target of 1.9 percent of the GDP was met in 2018 and the current account balance has been improving.

Albayrak reminded that inflation hit 25 percent but eased to 20.3 percent at the end of 2018 which was below the government’s target.

The minister also said that the Turkish Central Bank is doing its job very well in the last couple of months.

“They [the Central Bank] have proved how independent and how strong they are and I think they are going to do their job from now on.”

At its latest monetary policy committee meeting held on Jan. 16, the Central Bank decided to keep its policy rate (one-week repo auction rate) constant at 24 percent.

The bank’s next rate-setting meeting is scheduled for March 6.

Borrowing strategy

When asked whether cutting on the Turkish Lira issuance while borrowing heavily by tapping domestic investors for hard currency is a conscious effort to keep the lira interest rates low, Albayrak said that the government will be very active and aggressive on Treasury management.

“Currency-wise, maturity-wise, interest rates-wise, we can be very active. The successful Treasury management also depends on how we’re going to borrow, how much we’re going to borrow and at what cost we’re going to borrow. It’s normal to see a bit different stuff than the previous stuff our Treasury has done,” he added.

On a related note, the Treasury and Finance Ministry announced on Jan. 24 that as part of its 2019 external borrowing program it has mandated BNP Paribas, Deutsche Bank and JP Morgan for the issuance of a euro-denominated bond due 2025.