OECD pessimistic on Turkey

Bloomberg

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The global crisis has triggered a "record contraction in private investment," as demand in Europe for Turkish-made cars and machinery dries up, the Paris-based OECD said in a report Wednesday. Exports will probably fall 12 percent this year, it said.

The economy may expand 2.6 percent next year, helped by interest rate cuts from the Central Bank and government stimulus measures including tax cuts and subsidies for business, the OECD said. To sustain growth, the government must convince investors that it will keep spending under control, it said.

"A new standby Agreement with the International Monetary Fund, or IMF, would also help by providing a reliable funding source and credible monitoring," the report said.

Turkey has delayed signing a IMF loan agreement since the expiry of its last $10 billion accord in May 2008. Ministers say the fund is seeking to impose budget-tightening measures that are the opposite of the policies other OECD countries have adopted to soften the impact of the global recession.

Turkey’s government agrees with IMF forecasts that the economy will shrink about 5 percent this year, business daily Referans reported Wednesday, citing unidentified officials. The World Bank this week predicted a 5.5 percent contraction.

The OECD also forecast year-end inflation of 6.3 percent this year, falling to 5.9 percent next year. Inflation was 5.2 percent in June.