Turkey ‘ready to face global turmoil’
Posted by meb at January 25th, 2008
The fluctuations in the global markets may affect Turkey but the country is well prepared, said State Minister for the Economy Mehmet Şimşek, who attended the meetings of the World Economic Forum in Davos, launched Wednesday.
“Turkey is now standing on much healthier and stronger ground, compared to past. Therefore the effects of such shocks on Turkey would be limited and tolerable,” said Şimşek.
The Turkish economy is based on very strong macro-economic grounds, said Şimşek, adding that very important improvements have been implemented in public finance in recent years. The 2008 budget stands on healthy ground and the banking sector is very strong, said Şimşek.
“We have implemented many reforms in recent years and made Turkey resistant to shocks. The proportion of public net foreign debt stock to national income in Turkey is 1.6 percent as of the end of 2007. Therefore, the effect of any shock directly on public financing would be very limited and tolerable.”
Trust in Turkey
The world will probably experience a growth slowdown this year, said Şimşek. Until recently, everyone thought the only reason behind the global fluctuations was sub-prime mortgages in the United States, said Şimşek. “However, I always emphasized the possibility that the problem may be in fact more extensive and bigger. I always said that we take problems seriously and that we should continue with proper policies, fiscal discipline and sound monetary policies.”
Turkey is a country with high credibility and performance, and trust in Turkey is high, said Şimşek. “Prices will inevitably increase to some extent when risk appetite decreases. It will increase further to more moderate levels. We are working on how to maintain the strong acceleration Turkey has achieved in recent years and how to prepare its infrastructure.”
At a first glance, Turkey’s current account deficit surely looms large as a fragility factor, said Şimşek, adding, “However, I do not think there is an obstacle for financing with healthy and long-term resources as long as Turkey goes on with proper policies, reforms and privatizations.”
Uncertainty regarding Turkey decreased dramatically while interests declined slightly, increasing the possibility for revival in domestic demand, said Şimşek. “Maybe Turkey will continue to grow below its potential in the short run. Our potential is not to go below 6-7 percent. However, I believe Turkey will attain its potential growth figures (6-7 percent) easily in the medium term thanks to proper policies and the reforms we have made (and will make) in the medium and long term. Turkey will swiftly close its gap with Europe.”
Strong banking sector
During such global shocks in the past, the economy used to be affected profoundly due to weakness of banking sector, said Şimşek. “Such possibility remains low now. However, this does not mean that Turkey would not be affected if there is a storm outside.”
All banks have been profitable in the last few years, said Şimşek. “Capital adequacy ratio is around 19 percent. The banking sector does not have a net open currency position as it used to. The interest risk decreased as banks put an emphasis to credits rather than treasury notes. The exchange risk also stands at a low level.”
Şimşek also commented on the foreign capital’s abandoning portfolio investments in recent months. “It is normal to experience such moves in portfolio investments in the short run. However, what is important is that Turkey’s medium and long-term outlook is still positive. Therefore, basically there is not much difference regarding views and expectations of Turkey in that respect. Turkey can still draw significant foreign direct investment.”
Source: Turkish Daily News
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