Report says crisis will hit Turkey at four chokepoints
Posted by meb at November 10th, 2008
The current financial crisis will mainly inflict its damage on the Turkish economy through four conduits, and the government has only a limited amount of time to start a comprehensive plan to avert the effects with the least amount of harm, a recent report has said.
The Economic Policy Research Foundation of Turkey (TEPAV), which is the think tank of Turkey’s largest businessmen’s organization, the Turkish Union of Chambers and Commodity Exchanges (TOBB), has claimed in a recent report that the crisis will show its effects through loans, customer portfolios, foreign trade and consumer behavior.
TEPAV noted in its report, titled “2007-08 Global Financial Crisis and Turkey: Effects and Proposals,” that the crisis is well poised to hit the Turkish economy and the government must be faster in launching safeguards against the crisis.
The possibility that these four areas will be choked at the same time is very high, the report estimated, and read that in such a case, Turkey will, without doubt, suffer from the crisis. “It is truly a matter of concern that if this happens, our economy will encounter a sequence of very negative incidents in a short period of time,” it said.
From this point of view, the TEPAV report was not so optimistic about the fate of the Turkish economy in 2009 in the midst of heavy turbulence. It estimated a slowdown in growth and the continuation of the rise in interest rates. The Turkish lira will keep depreciating as a consequence of these negative developments, it predicted, and further noted that household income will not increase.
TEPAV suggested that the government should create a fund from the reserves of the Turkish Central Bank to help the private sector. The report noted that this fund will be useful to help companies borrow money and offer a greater chance of finding more suitable loans.
Turkey has to design a rescue package tailored to its own needs as soon as possible, TEPAV emphasized, saying it is only a matter of time before Turkey is in a more detrimental situation than its rivals in the international arena since the major actors of the global economy have already taken great strides to cope with the crisis with their proactive steps to avert it.
Signing a long-term and comprehensive stand-by agreement with the International Monetary Fund (IMF) is a must for the government so long as this deal inspires extra confidence in investors, the report said. It also underlined that such a deal would create a strong peg against the serious problems that the economy is destined to face in the months ahead.
Another recommendation stipulated by the report was the allocation of part of the unemployment fund to computer and foreign language training, which, it underlined, will contribute to the creation of a better-skilled labor force. Turkey has nearly YTL 36 billion in its unemployment fund, of which only YTL 1.5 billion is currently being used to pay unemployment benefits. This money is largely being exploited to buy Treasury debt in return for interest payments.
Furthermore establishing a more effective means to attract greater amounts of Gulf capital to Turkey was also listed as among the major precautions to be taken to weather the approaching storm with the least possible damage. Thanks to soaring oil prices, a large sum of capital has been accumulated in the Gulf region over the last several years, and the global markets, crunching from the lack of enough liquidity to turn the wheels of finance, are salivating at these huge Gulf capital powerhouses.
The report also focused on the Economic Coordination Board (EKK), mentioning the necessity of assigning this periodically convening body a central role in coping with the hurdles of the economy. The EKK will form a strong mechanism to produce solutions for the current problems and the possible negative developments to occur due to the crisis in the foreseeable future, the report asserted. The government must more seriously pay attention to and take into consideration the decisions coming out of EKK meetings, it said, and suggested in the light of previous meetings that a looser fiscal policy has to be implemented to ease the current hurdles in the markets.
The report also pointed to the need for increased cooperation between the financial sector and industry. The banks have to be rendered stronger, while the options for supplying loans to the non-financial sector must not be curtailed, the report suggested.
source: Today’s Zaman
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