Structural reforms to play big role in reaching functioning democracy: Babacan

BURSA

AA Photo

Turkey needs to continue to make reforms to achieve a functioning democracy at internationally high standards while maintaining sustainable economic growth, Turkish Deputy Prime Minister Ali Babacan said March 13 at the Uludağ Economy Summit.

“The establishment of a new constitution will be one of the most significant steps for Turkey to make in the near future. The new constitution must be based on universal law norms,” he said at the summit, which is being organized by the Doğan Group’s economy magazines Capital and Ekonomist in the northwestern province of Bursa.

The new constitution will be a great opportunity for Turkey as long as it is based on universal legal standards, he said.

Babacan added that former Justice Minister Bekir Bozdağ had shared the draft judicial reforms with members of the cabinet before he quit his ministerial position.

“One of the biggest priorities is for Turkey to realize judicial reform just after the coming elections,” Babacan said.

Babacan said Turkey’s 2014 growth rates would be announced at below 3 percent. The official growth numbers will be announced soon for the last year.

“We need to set higher growth targets, but we can only achieve this by making structural reforms, not by means of temporary financial and monetary policies,” he said.

Turkey’s growth potential is around 3 percent with its own dynamics, but each increase in exports makes a positive contribution to the country’s growth, Babacan said.

“The only way for a country to grow its economy is to increase its productivity. We must focus on increasing our economic productivity,” he said.

The global economy has still been struggling to overcome several difficulties, but there is nothing to fear as long as robust economy policies are adopted, said Babacan.

Central Bank ‘only address to communicate’

In an apparent attempt to quell concerns about government interference in the Central Bank’s policies, Babacan also said the state lender should be responsible for its monetary policy alone.

“The Central Bank alone should be responsible for communicating its monetary policy messages,” Babacan said, while adding that the predictability of monetary policy needed to be improved.
 
“I believe I have learned our institutions very well for the last 12 years. There is nobody who can analyze the monetary policy other than the people in the Central Bank,” Babacan said at a separate interview with Cnbc-e after his speech.

As long as the risk premiums are at reasonable levels, there will be no risk for the Turkish economy, but uncertainties will cause capital to escape, he said, adding that such risks would decrease as long as it is only the Central Bank that makes announcements about monetary policy.

Markets have been unnerved by President Recep Tayyip Erdoğan’s frequent attacks on the Central Bank, including comments that interest rates cause inflation and that those who defend high rates are guilty of treason.

After several weeks of the plunge in the Turkish Lira against the U.S. dollar, Erdoğan said March 12 his talks this week with Central Bank Gov. Erdem Başçı had ended positively and with a consensus, comments which also appeared designed to ease tensions over monetary policy.