Turkish government dampens down economic outlook

ANKARA

Turkish Deputy Prime Minister Ali Babacan has announced its mid-term economic program, setting Turkey’s new targets for growth 3.6 percent for this year, 4 percent for next year and 5 percent in 2015 and 2016. DAILY NEWS photo, Selahattin SÖNMEZ

The Turkish government announced its mid-term economic program yesterday, cutting down its growth forecast for the 2014-2016 period, while also increasing its target of inflation and unemployment.

The government reduced the growth rate target from 4 percent to 3.6 percent for this year and from 5 percent to 4 percent for 2014, Deputy Prime Minister Ali Babacan announced at a press meeting.

Turkey revised its growth rate targets downwardly, in parallel with the latest forecast cuts in the world, Babacan noted.

He said that the IMF now expected global output to expand just 2.9 percent this year, down from 3.6 percent, and 3.6 percent next year, below its estimate of 4.1 percent.

Babacan stated that they prioritized reducing the current account deficit and inflation and increasing growth and employment. “The Turkish economy’s structural problems are quite known: Our domestic savings are very low, we’re highly dependent upon foreign energy sources and our value-added production is in low levels,” said Babacan. “All of our policies will be complementing each other, from financial to fiscal to resolve all of these structural problems.

We have obtained very good results from public finances, reaching the lowest budget deficit since 2006.”

3.6 pct growth target

The new targets for growth are 3.6 percent for this year, 4 percent for next year and 5 percent in 2015 and 2016, Babacan said. The program foresees an inflation rate at 8.9 percent by the end of this year, above the previous target due to the depreciation of the Turkish Lira and rise in energy prices, he said.

The inflation target is 5.3 percent for next year and 5 percent for 2015 and 2016, he added.

Babacan said they aimed to leave the current account deficit rate at 7.1 percent by the end of this year, 6.4 percent for next year, 5.9 percent for 2015 and 5.5 percent for 2016.

Domestic savings have decreased to 12.6 percent, historically low levels, as of 2013, said Babacan while the share of investments to GDP will be around 19.6 percent this year.

The budget deficit-gross domestic product (GDP) ratio target decreased to 1.2 percent from 2.2 percent this year, thanks to incomes from the privatizations and the other incomes – for once only.Turkey’s debt stock-national income ratio would be 35 percent, he said, adding that they aimed to reduce it to 33 percent next year.

“There had been a significant rise in banking loans until 2011, but we started to see a decreasing trend after our interventions. The loans have however started to increase again for the last year, pushing our current account deficit up.

“Our banking measures really make sense here. First of all, we have monitored closely the latest regulation by the banking watchdog (BDDK) to include financing firms into the scope of keeping cash reservations, like banks. Secondly, we have given great importance to the latest and forthcoming limits on credit cards and consumer loans.

“We do not want to regulate on these fields, but we need to do this both for good of your family life and of our macroeconomic balance,” Babacan said.