Turkey may need $130 bln

Hurriyet Daily News with wires

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As the slow down in the global economies threatens emerging markets, Turkey will not remain immune and it will need $130 billion worth of external financing next year, said the World Bank's country director in Turkey. The global economic and financial crisis will certainly be felt in Turkey, simply because it has shown its affects in all emerging markets, Ulrich Zachau said yesterday in Istanbul, speaking at the 6th International Finance Summit.

As the growth stalls, some changes will take effect in the country’s income, fiscal and social policies, reported Anatolia News Agency, citing Zachau. Therefore one must be prepared. Strong, new policies need to be generated and preventive measures against the risks must be taken, he urged. If Turkey proceeds with the reforms it has been implementing, then the country would display a much improved and more resilient performance, Zachau said.

Economic growth began to slowdown in Turkey, just as it did in many other emerging countries, due to the global integration of the global economy. As the situation is expected to be prolonged, Turkey needs to be prepared. Although Turkey is expected to attain $13 to 15 million in foreign investments, that figure is expected to decline next year, Zachau said.

"The outside financing need of Turkey will reach $130 billion," he added. Still Zachau tried to reassure Turkish officials and business circles by saying that the finance sector in Turkey was in a much better state then it used to be, thanks to the reforms implemented during the past couple of years. Turkey’s precautionary policy helped reduce the country’s public debts to below 40 percent. Turkey’s debt is a very small amount compared to its gross national products, showing that the country’s fiscal and economic policies have been successful, said Zachau. However, Turkey is not immune to crisis. A medium term fiscal frame has crucial importance, he added.

The Banking Regulation and Supervision Agency, or BDDK, will closely watch for rises in non-performing loans of the banks, said Tevfik Bilgin, the banking regulator’s chairman, who also participated in the summit. The biggest risk will be seen in bank loans in the coming period, he warned. Tevfik Bilgin also said the banking watchdog would monitor Turkish banks' moves closely if the government introduced full guarantees for bank deposits.

"One of the reasons behind the economic recession is the breaching in the labor force market. Global fluctuations will most likely be reflected in the real economy. Central Banks, mainly the U.S. Federal Reserve, are responsible for constraining the global fluctuations," said Bilgin.

Turkey's Central Bank may extend the period within which banks are required to pay back Turkish lira borrowed in weekly repo auctions to help boost liquidity, Central Bank Deputy Governor Erdem Başçı said. The Bank may extend the maturity of such lending to as much as three months from a week and reduce the interest rates it charges, reported Bloomberg, citing Başçı. The bank's board may also decide to decrease the reserves that banks are required to deposit at the Central Bank if liquidity in the banking system deteriorates, he said.