Luxury consumption, investment risky for Turkey: Babacan

ISTANBUL

DeputyPM Ali Babacan (C) has warned against luxury investments. AA Photo

Luxury consumption and investment in luxury projects financed by foreign loans may cause trouble down the road for Turkey, Ali Babacan, the deputy prime minister and the government’s economy tsar, has warned.

“Luxury shopping and luxury houses financed by foreign loans without production could hold Turkey down,” Babacan said during a live interview with broadcaster CNBC-e on July 23.

He described every new real estate project as a “new monopoly.”

“Industrialists are torn between investing in industry or building shopping malls and residences, and there is a shift toward the latter … But we should produce, deserve and then shop in malls and live in luxury houses,” Babacan said.

Turkey has recently been warned against swelling luxury demand as well as booming housing projects, which add to the current account deficit, seen as the soft underbelly of the country’s economy.
[HH] Reform delayed to post-2015

Babacan, who is widely credited with managing the country’s main economic policies for the past 10 years, also downplayed concerns over the current pace of growth and said the government saw no need to revise its year-end target of 4 percent unless there is a major unforeseen blow in foreign trade.

He said the foreign trade level currently contributed greatly to growth amid a dip in domestic demand.
However, he also said the “much-needed structural economic reforms” would likely be delayed until after the 2015 general elections.

The two top priority economic issues that the government will focus on after the August presidential elections will be 2015 budget and the new three-year Medium Term Program, Babacan added.