Turkish economy softening but no sign of contraction now, finance minister says

DAVOS

Turkey’s economic growth has softened but government moves to cut tax and accelerate the transfer of billions of lira to the Treasury mean Ankara currently sees no recession or negative growth, Finance Minister Berat Albayrak said.

Albayrak predicted the slowdown would be less serious than economists believe. Growth will bounce back strongly and the government’s overall 2019 growth target of 2.3 percent was still in reach.

“Currently we don’t see any recession, there is no minus growth,” Reuters quoted Albayrak as saying on the sidelines of the World Economic Forum in the Swiss ski resort of Davos.

Turkey announced several measures in the last four months to soften the economic slowdown, including a temporary lifting of taxes on purchase of cars and white goods and an early transfer of 37 billion Turkish Liras of Central Bank profits to the Treasury.

It also hiked the minimum wage by a quarter and rolled out a $3.7 billion loan package for small businesses two weeks ago.

“The necessary actions that we have taken so far, starting from late October definitely has a significant effect,” Albayrak said.

Central Bank’s rate decision

“When it comes to fiscal slippage it is not going to happen,” he said.

Turkey’s budget deficit stood at 72.6 billion Turkish liras ($14.8 billion) in 2018, meeting a year-end target under the country’s New Economic Program.

According to the New Economic Program, the budget deficit/GDP ratio target is 1.8 percent this year, 1.9 percent next year, and 1.7 percent in 2021.

The minister noted that the public debt to GDP ratio stands at 28 percent. “This points to a strong debt management.”

Albayrak also said he had always insisted that interest rates were the Central Bank’s business, not his.

“I don’t know what they are going to do [at their next policy meeting] in March. But I know whatever they do, they do on an analytically rigorous basis.”

Albayrak also played down a tweet from U.S. President Donald Trump last week that Turkey could face economic devastation if it attacked the YPG in northeast Syria once U.S. troops pull out.

The YPG is deemed by Turkey as an offshoot of the illegal PKK, listed as a terrorist organization by Turkey, the United States and the European Union.

“When you compare the effect of his remarks with the ones that we had last summer, it was significantly less,” Albayrak said. “Despite the headlines, the underlying cooperation between the two countries is pretty sound.”

The Turkish economy has immense opportunities to offer with its young and educated population, he also underlined.