Growth, budget targets may shift, says Babacan

ISTANBUL

Deputy PM Ali Babacan and his spouse Zeynep walks toward an historic castle in the eastern province of Kars. Turkey may grow slower than 4 percent, he says. AA photo

Turkey may not meet its targets for annual growth and the budget deficit this year, Turkish Deputy Prime Minister Ali Babacan, who also heads the Economy Coordination Committee within the Cabinet, said yesterday on a TV program.

“Four-percent growth [in the economy this year] is achievable, however, it should not be a surprise if it drops a little below that level,” he said.

When the official target was set at 4 percent last October, prospects regarding the world economy were much better than today, Babacan said, adding that both developed and developing countries have been revising their growth targets down.

“Still, keeping our 4 percent growth target unchanged indicates that Turkey is recording a relatively better performance in growth than expected,” he said. “Growth fueled with excessive credit expansion is not sustainable and brings the adverse side effect of increasing the current account deficit.”

No additional measures

The deputy prime minister said there was no need for any additional measures this year as macroeconomic development, including 15-percent annual credit expansion and economic growth, are progressing as expected.

Domestic demand has a lower share in economic growth, which in turn decreases tax revenues, he said. “Budget revenues will be a little lower than estimated this year,” Babacan said.

Together with higher-than-expected expenditures, particularly a higher rise in civil servants’ salaries this year, will result in a higher budget deficit than planned, he said, adding that a budget variance this year would not affect Turkey’s debt dynamics and financial policy.

The official budget deficit target stated in the Medium-Term Plan is 21 billion Turkish Liras, or 1.5 percent of the gross domestic product.

The government’s target for the ratio of current account deficit to the gross domestic product is 8 percent, but Babacan said that 7 percent is a more realistic estimate now. The deficit is dropping faster than estimates, but it should not be expected to continue to fall at the same pace, he said, adding that structural measures and Europe’s economic conditions will be more effective on the current account deficit.