Graft probe, Fed raise risks on growth: Turkish finance minister

ANKARA

Turkish Finance Minister Mehmet Şimşek speaks at a press meeting held in Ankara, where he shared results of Turkey’s 2013 central budget performance. AA Photo

Turkey is expected to grow around 4 percent this year despite the downwards risks incurred by the Dec. 17 corruption operation upheaval and the United States central bank’s decision to taper its asset purchase program, the country’s finance minister has said.

The government had announced it foresaw growth to reach 4 percent in Medium Term Program, while revising the 2013 growth to 3.6 from previous 4 percent.

“It is obvious that both the U.S. Federal Reserve’s monetary tightening policy, which will probably continue with acceleration in 2014 , and the political operations started after Dec. 17 operations raise the downwards risks on the growth,” the minister said, speaking at a meeting at which he announced 2013 budget forecasts for the country.

Şimşek said the country was likely to manage around 4 percent growth despite the recession in the European Union and the weakness in the capital inflows to the country.

He said even if there were to be a slowdown, it would be temporary. “Because Turkey’s footing is firm,” he said, adding the country had succeeded in overcoming such a shock back in the years 2008 and 2009.

Turkey is particularly vulnerable to a cut in U.S. bond buying, which is set to take its first $10 billion reduction this month, as it depends on cheap capital inflows to finance its gaping current account deficit.

However, Şimşek was optimistic about the chronic weakness of the country saying the current account deficit “has not worsened except gold despite the strong soar in domestic demand, high oil prices, geopolitical tension at the region and weak foreign demand.”

Last year was an exceptional year for gold, he said, recalling the 12-month deficit was realized at $60.8 billion according to November data announced Jan. 14.

“The Turkish Lira has recently lost value and the EU is recovery process. All of these would positively affect the current account deficit in 2014,” the finance minister said.

Şimşek still sought to play down the medium and long-term investor exit concerns saying the public financial management and monetary policy enables maneuver space for pulling down the risks.

“The global investor exit from our market was very limited despite all this tumult and some kind of political operations,” Şimşek said.

The minister also noted he was due in London and New York over the next week to meet investors and explain the political situation in the country to them.