Turkey likely to revise down annual growth target, Deputy PM says

ANKARA - Reuters

Deputy Prime Minister Ali Babacan said July 17 it should be “no surprise” if the government revises down its growth expectations for this year. AA photo

Deputy Prime Minister Ali Babacan said July 17 it should be “no surprise” if the government revises down its growth expectations for this year, adding that it had no immediate plans to do so.

Emerging markets such as Turkey have been hit hard since the U.S. Federal Reserve (Fed) first indicated plans on May 22 to begin tapering its huge stimulus program.

Turkey’s Central Bank has been reluctant to hike rates following a credit-fuelled boom, with Prime Minister Tayyip Erdoğan keen to maintain strong economic growth ahead of elections next year.

The official forecast for Turkish gross domestic product (GDP) is 4 percent growth this year. “Downward revisions on growth are on the table across the world because of the U.S. policy stance and Europe’s inability to recover,” Babacan, whose portfolio includes the economy, told CNBC-e and NTV television stations in an interview broadcast live.

“If we make a small revision or two, it should not be a surprise, when our biggest export market and other emerging markets are revising, but this has nothing to do with Turkey’s fundamentals,” he said.

Babacan added that officials still needed further statistical data from the second quarter before any decision to change the GDP growth target. He also said the government’s forecast of exports reaching $158 billion by year end was still valid but appeared increasingly difficult to attain due to global economic conditions.

Volatility in global financial markets is the main cause for a recent sell-off in Turkish assets, rather than the anti-government protests that other officials have called a conspiracy to undermine the country’s economic stability, Babacan said.

In parallel with this statement, speaking at an iftar meal hosted by the Independent Industrialists’ and Businessmen’s Association’s (MÜSİAD) on July 16, the deputy prime minister also pointed out that because the Gezi Park protests happened at the same time as serious fluctuations in many developing countries’ markets, developments in Turkish markets were perceived as being related to the protests.

However, he said that all institutions of the government had been prepared for a low-liquidity era that is facing the world after the Fed signaled it would slow down its bond-buying, confidently claiming that Turkey won’t be affected permanently by these developments that will unsurprisingly continue.

“The crisis, which has been continuing since May 22, has come to a phase that is very influential in the developing countries like Turkey,” said Babacan. “At the beginning of May, we said ‘a period like this will come and we, as the state, have already made our preparations.’ This fluctuating period may continue for a while. There is a worldwide search for new parameters, new market indicators and a new balance.”

Babacan stressed that the fundamentals of the Turkish economy had been consolidated over the last 10 years and they had already taken all the necessary measures against such fluctuations, adding that institutions had prepared written action plans for scenarios such as that being experienced today.
The market indicators may move toward new balances, which are still being formed, Babacan said. “We hope they won’t have a permanent effect on the Turkish economy,” he added.