Lagarde urges cautious growth

ISTANBUL - Daily News with wires

IMF Managing Director Lagarde poses with Economy Minister Çağlayan. AA photo

The International Monetary Fund (IMF) would be the first to congratulate Turkey if the country manages to grow 4 percent in 2012, way above the fund’s 2.3 percent forecast, according to Managing Director Christine Lagarde.

Appearing on Turkish television before a meeting with Turkish Prime Minister Recep Tayyip Erdoğan today, Lagarde also underlined the risks that the lingering current account deficit poses for the economy.

During an earlier interview with CNN Türk, IMF chief Lagarde said that cutting the country’s current account gap and reigning in inflation are the main tasks facing the Turkish economy. Turkey’s current account gap dropped to $10.1 billion in January and February 2012, according to figures released by the Central Bank last month. The gap was down 15.88 percent year-on-year in January and February 2012, having been at $12.058 billion in the same period of 2011. The current account gap will continue to recover and the Central Bank is optimistic for the 2012 growth pace, according to Gov. Erdem Başçı.

Lagarde stressed that the Turkish government would need to implement a very strong fiscal policy in order to solve these two issues, and that only with such policies in place would growth be sustainable.

Turkey could benefit from more direct investment and more exports, she added: “Turkey needs to examine its own economy and hear from investors what needs to be done. Maybe there’s too much hot money and this needs to be turned into lukewarm money.”

In a separate interview on Bloomberg HT, Lagarde said the IMF prepares its forecasts in accordance with the physical data. “If Turkey grows 4 percent and manages to cut its current account deficit meanwhile, I will be the first one to congratulate,” the broadcaster quoted her as saying. Commenting on European economic woes, Lagarde said the problems in Spain and Greece were quite different. The IMF has inspected the Spanish banking system in detail and achieved satisfying results, she said, claiming that the austerity measures in Spain will help strengthen the economy. Greece, on the other hand, should stick with reforms, she said.

Earlier in the day, the IMF director visited disabled people in the Kocaeli province neighboring Istanbul during an event held by a local municipality and a non-governmental organization. Kürşad Tüzmen, a former Cabinet minister accompanied her.

Turkish Deputy PM Ali Babacan and Economy Minister Zafer Çağlayan also met with Lagarde yesterday, Çağlayan also met with World Bank Managing Director Sri Mulyani Indrawati in Istanbul. The World Bank has three managing directors. Lagarde, Indrawati are scheduled to The Coordinaiton Council for the Improvement of Investment Environment meeting today to be inaugurated by PM Erdoğan.