Turkey signals cut in growth, export targets

ANKARA - Hürriyet Daily News

Deputy PM Babacan says Turkey may reduce its growth rate below 4 percent and export target below $158 billion. DAILY NEWS photo/ Selahattin SÖNMEZ

Turkey may slash its growth rate target to below 4 percent and its annual export target to below $158 billion, mainly due to the global economic fluctuations, Deputy Prime Minister Ali Babacan said yesterday during a live interview on Turkish Radio-Television (TRT).

“Growth targets have now been revised downward. It should not be surprising for Turkey to revise its growth rate below 4 percent, which is still very good under such global economic conditions,” Babacan said, adding that there had appeared to be no need to make an official revision for now. “We set our annual target as $158 billion, but it looks difficult to reach this target as well,” he noted.

The comments by Ali Babacan may trigger disagreements among the Turkish ministers about the growth rate as was recently the case at the end of last month.

After Ali Babacan had signaled a decrease in the growth target by the middle of July, Economy Minister Zafer Çağlayan said that the country needed a growth rate of between 5.5 and 6 percent, despite the growth target in the medium program being determined as 4 percent, but Central Bank Governor Erdem Başçı said last week that the growth may undershoot an official forecast of 4 percent for this year.

Gezi affects Turkish economy slightly

The recent global economic trends have affected not only Turkey, but all emerging economies, from Brazil to India and Russia, Babacan emphasized.

“After the U.S. Federal Reserve (FED) had signaled a policy shift towards a gradual monetary tapering by May 22, we saw main national stock exchanges in many emerging economies plummet, interest rates showed an increase, and currencies lost value against the dollar. While the Indian rupee fell 9.7 percent and Brazilian currency fell 12.3 percent against the dollar, the Turkish lira fell 4.6 percent against the dollar, making Turkey among the countries whose currency was affected relatively little,” Babacan said.

He also added that the main stock exchanges of Brazil plummet by 13.8 percent, of China
by 10 percent, of Indonesia by 11 percent and of Chile by 11 percent, although Turkey’s main exchange plummet by 20.3 percent.

“Turkey might feel the negative effects of the FED’s policy shift a bit higher than other emerging economies, due to the Gezi incidents and our already higher current account deficit. The main reason lying behind the latest market fluctuations in Turkey, however, is caused by the latest global economic trends. Even if the Gezi protests had never happened, Turkey would have seen those market fluctuations anyway,” Babacan said.

He also noted the latest global economic crisis has entered a new phase since May 22. “We’ll all see the spillover effects and new faces of the crisis in the coming months, but Turkey’s economy administration is very prepared,” Babacan noted, adding that the Turkish government had maintained both political and economic stability for the last decade.