Turkey’s 2014 growth to be around 3 pct, says Finance Minister

ISTANBUL

Finance Minister Mehmet Şimşek. DHA Photo

Turkey’s economic growth in 2014 is expected to be around 3 percent, Finance Minister Mehmet Şimşek has predicted, below an official target of 3.3 percent in the country’s medium-term program.

“Growth at around 3 percent is modest in itself, but high in the light of the existing economic problems in the European markets, Turkey’s largest trade partners, and the geopolitical chaos and tensions in the neighboring region," Şimşek said.

"Turkey grew 2.8 percent in the first nine months of the year. The third quarter rate was below our forecasts, as the shrinkage in the agricultural sector was higher than the previous expectations. The drought also hit growth rates, as well as our inflation. As long as a big fall does not happen in the last quarter, we expect to close the year at around 3 percent,” he added.

The budget deficit is expected to be 24.5 billion Turkish Liras ($10.7 billion) for 2014, Şimşek also told broadcaster NTV, corresponding to 1.4 percent of GDP.

With the current oil prices at around $50, the inflation rate may drop below 5 percent, he added.

“The year 2014 was the most arid of the last 13 years and this negatively affected food prices. Annual food prices increased by 14 percent last year, pushing the price index up,” he said.

“Despite all these negativities, the Central Bank achieved keeping the inflation rate at 8.2 percent, although it was higher than the targets, by making monetary tightening policies and other measures,” Şimşek said, noting that the lira is "not overvalued at the moment."

“If the U.S. Federal Reserve makes an unexpected increase in rates or the U.S. dollar continues to gain value in global markets, our inflation rate may increase, but only temporarily,” he added.

Şimşek also claimed that Turkey would benefit if the oil prices stay near $50. “Our current account deficit decreases by $4.5 billion with each $10 decrease in oil prices,” he said.

The finance minister also vowed that there would be no increase in corporate or income taxes.

“We’ll be spreading the taxes to the bottom by making the law simpler and receiving taxes from several rents,” he said.