Turkey cools growth down
BURSA - Hurriyet Daily News
Ali Babacan (C) smiles from atop a cablecar going down the Mount Uludağ, a popular ski resort in northwestern Turkey, which hosted an economic summit on March 16. AA photo
Turkey is cooling down its economy as it faces global economic uncertainty, in order to gain maneuvering capability, the Deputy Prime Minister said yesterday, emphasizing that Turkey was falling behind in attracting foreign direct investment compared with emerging nations.
“We could have targeted eight percent economic growth easily, but we wanted to prioritize the sustainability of the economy by targeting four percent,” said Ali Babacan, speaking at the first “Uludağ Economy Summit,” considered Turkey’s equivalent to the Davos Economic Forum.
Noting that the economic crisis was still continuing in different phases, Babacan said: “We are trying to prepare for all possible scenarios … When the fog is dense, you need to slow down due to unpredictability.”
Reiterating the Turkish government’s target to become one of the top 10 global economies by 2023, Babacan noted that Turkey was weak in attracting enough foreign direct investments due to heavy red tape.
“Turkey could only attract $14 billion despite all our efforts, while the total volume of FDI was nearly $1.6 billion in global markets,” he said. Turkey will not be able to achieve its target of being among the Top 10 global economies with at least $25,000 average income per capita in 2023 unless it eases the bureaucratic obstacles in front of possible investors, according to the minister.
Turkey’s domestic saving ratios are at a historically low level said Babacan, warning that the country should work on increasing the domestic saving ratio in order to narrow its current account deficit.
Noting that the domestic saving ratio was nearly 12 percent of the national income, and that Turkey’s consumer credit in the last two years had hit nearly $95 billion, Babacan said: “we have started to consume too much … Citizens have spent by increasing their household debt.”
According to the minister, the currently low savings ratio is not sustainable. He said the Turkish government was preparing to launch a series of new regulations to encourage people to increase domestic savings through personal insurance funds and alternative tax reductions.
Noting that the average total length of education Turkish people above the age of 25 was nearly 6.5 years, Babacan said: “It is just a dream to think of taking place among the top 10 economies with this level of education.” He said Turkey had to implement strong reforms in its educational system, leaving behind ideological differences.
Speaking at the meeting, Ümit Boyner, the Turkish Industry and Business Association (TUSİAD) said Turkey should not only focus on economic growth, but also the developments in women’s workforce participation and human rights.
Turkey has to grow approximately 6-8 percent annually in order to compete with Italy, Mexico and South Korea, all ahead of Turkey in the list of top 10 economies of the world. However, Boyner warned: “We have to lay the tracks of the railroad of this fast train very carefully,” noting that fast economic growth also brought risks such as increasing dependence on imported energy sources, which fuel Turkey’s current account deficit. According to her, Turkey should focus on innovation and manufacturing high value added products to increase its competitiveness.