Posted by meb at April 25th, 2008

Turkey still has a secure position in the international economy, though it inevitably feels the side effects of the current global credit turmoil, according to Mehmet Şimşek, the economy minister, who spoke at an international forum in Istanbul yesterday.

Despite these comforting words, Michael Deppler, the International Monetary Fund’s (IMF) European director, said he is quite pessimistic about the Turkish economy.

Şimşek and Deppler spoke yesterday at Forum Istanbul 2008, a platform designed to discuss the problems of global and domestic economies.

Şimşek told the audience at a conference titled “Economic stability: Turkey’s anchor and beyond Turkey’s place in global capital flows and emerging markets map,” that the last nine months have been “tough” globally, due to the unveiling credit crisis in the United States.

“But emerging markets, particularly Turkey, still have a secure position even though our country inevitably feels the side effects of the credit turmoil,” he continued.

Cold shower:

“I am rather pessimistic about the financial picture of Turkey,” said the IMF’s Deppler, at the same meeting. “We are experiencing a soft recession in the U.S., while Europe is growing. The growth rate of Europe was in a range between 2 and 2.5 percent the previous year. It will decrease to 1 percent in 2008.”

Inflation in Turkey will “unfortunately be higher than we expected,” Deppler said. “Also, the rise of oil and commodity prices will affect Turkey negatively.”

“People tend to draw a very optimistic picture of the economy and ignore certain issues,” he continued, in thinly veiled criticism of the Justice and Development Party (AKP) government.

Turkey has become a “magnet” for foreign investment, Deppler noted. “Still, the rate of foreign investment is quite low in the short-term view in the context of international scale. Turkey is still under-average in foreign investment,” he said.

“Turkey should determine its priorities and should keep them in mind,” Deppler continued. “For instance, what will be done in the energy sector? Do not look at budget issues while handling domestic problems. Please do not think of the budget. Remember, looking at the budget had only caused big problems in the past.”

From Asia to SWFs:

Forum Istanbul 2008, titled “Turkey’s Stability and Growth Drive,” brings Turkey’s and the world’s leading figures in business and economics together. The forum will continue through today at Swissotel Istanbul.

The panelists in Wednesday’s sessions discussed petro-dollar investors from the Gulf, the large amount of liquidity amassed by Asian central banks, hedge funds and private equity firms, sovereign wealth funds (SWFs) and new major players in the world economy.

The impact of sovereign wealth funds on the economy was one of the main focus points of the opening session, titled “The World’s New Power Brokers and Turkey.”

“Although SWFs currently make up no more than 3 percent of the world’s $165 trillion-worth traded securities, they have a lot of firepower,” said Alastair Newton, a senior analyst at Lehman Brothers. “Their growth rate is 20 percent annually. The Gulf’s big funds can gain, from oil and gas revenues, another $300 billion to manage this year alone.”

Lately, they have “looked to diversify away from their traditional focus of government bonds into the full range of financial instruments,” Newton added. “Turkey faces huge current account and trade deficits in a global environment, marked by the signs of significant slowdown this year and in 2009 when it will be hard to continue to attract both direct and portfolio investments to finance these deficits,” the analyst continued. “Therefore SWFs from Russia, the Gulf and Asia will find a warm welcome awaiting them from Turks keen on bridging this gap. Equally, Turkey’s improved business environment and enhanced economic and strategic ties to the Gulf, Russia and Asian surplus countries could well result in substantial SWF inflow.”
source: Turkish Daily News

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