IMF: Gigantic opportunities for Turkey’s economy
Posted by meb at March 10th, 2007
Opportunities for the Turkish economy are enormous, said an International Monetary Fund (IMF) mission to Turkey on Friday in its concluding statement for the 2007 Article IV Consultation meetings.
“The goal should be to build on the economic success of the last five years to firmly entrench high growth, secure low inflation and make the economy more flexible and resilient to external shocks,” the report said. The IMFsaid that continued disciplined fiscal and monetary policies complemented by bold structural reforms are essential to lift Turkey onto a significantly higher growth trajectory. The IMF also claimed that the agenda is large and some reforms could face resistance, but the rewards in terms of sustained improvements in living standards would make the effort well worthwhile. The IMF also praised Turkey’s economic performance and said it was the result of a combination of fiscal discipline and prudent monetary policy by an independent central bank.
“Political stability, structural reforms and favorable external conditions have facilitated this good performance,” the IMF commented. It also stressed that the economy had recently entered a more challenging phase. Last year’s turbulence in international markets played an important role for the slowdown of growth, the report said, adding that higher interest rates in response to a concurrent uptick in inflation reduced credit growth and dampened the pace of domestic demand.
“We expect GDP growth to ease to about 5 percent, while, with little slack in the economy, inflation is likely to converge to its target only gradually. And though the trend in the current account deficit is expected to reverse in 2007 –helped by softer domestic demand, lower oil prices and robust growth in Turkey’s main trading partners — external financing needs remain large, leaving the economy susceptible to financial market turmoil.”
The IMF also insisted that low single-digit inflation would support strong and stable medium-term growth and achieving the 2007 fiscal targets will help lower inflation and preserve financial market confidence. Another point the IMF stayed on was that over the medium term the challenge will be to anchor fiscal policies around the key objectives of reducing public debt and cutting distortionary taxes.
It also warned that the immediate post-election period should provide an opportunity to launch a new agenda of structural reform. “Immediate priorities should be given to measures that securelong-term fiscal savings and bolster productivity and employment.”
It also focused on social reform. A central element of the reform agenda should be resurrecting social security reform, the IMF said. “Such reform remains, however, essential to avoid large future deficits in the pension and health care systems and create fiscal resources for other, growth-enhancing reforms.”
source: Today’s Zaman
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