OECD: Turkey’s economy may grow 3.7 percent in 2010

Turkey’s economy may expand 3.7 percent next year, the Organization for Economic Cooperation and Development said, raising its forecast for the EU membership candidate.

Turkish policy makers drove real interest rates lower and stimulated the economy with tax cuts during the global financial crisis, the Paris-based OECD said in a report on Thursday. To preserve those gains, the government should take further steps to improve the openness of fiscal planning, including legislation to limit borrowing, it said.

Rising unemployment will limit the contribution domestic demand will make to growth and Turkish exporters will have to work to ensure they’re competitive enough to benefit from a pick-up in global demand, the report said. Exports will probably rise 4.5 percent in 2010, it said.

Gross domestic product will probably contract 6.5 percent this year, deeper than the 5.9 percent shrinkage the OECD forecast in June. At the time it predicted a 2.6 percent expansion for GDP in 2010.

The government plans to pass a law to restrain borrowing at the start of next year, Deputy Prime Minister Ali Babacan said Wednesday. It will take effect in the 2011 budget, according to the government’s medium-term plans, which aim for 3.5 percent economic growth in 2010.