Economic fragilities persist, rating agency warns Turkey
ISTANBUL - Hürriyet Daily News
Turkey’s current account deficit is narrowing and the imbalances of overheating are recovering says Fitch’s Parker. AA photoTurkey has successfully managed to escape recession but fragilities in its economy – mainly the large current account deficit – are still cause for concern, according to Fitch analyst Ed Parker.
Financing the gap with short-term resources is improving the fragility, Parker said at an Istanbul meeting yesterday, held only three days after the international credit rating agency upgraded Turkey to investment level. It was Turkey’s first investment-grade rating from one of the three big rating agencies since 1994.
Fitch’s main concern before the upgrade was the balance of payments, he also noted.
Turkey’s lingering current account gap will fall to $58 billion Turkish Liras this year, Parker forecasted.
‘Fluctuations will last’
Growth in exports and a fall in imports due to market diversification were effective in facilitating the downward trend, he added. However, the agency expects fluctuations in the economy to continue.
Balance of payments accounts are an accounting record of all monetary transactions between a country and the rest of the world. These transactions include payments for the country’s exports and imports of goods, services, financial capital, and financial transfers. A gap in this balance is considered normal in developing economies as long as it is sustainable.
Turkey’s debt ratio to the gross domestic product will fall to 31 percent in three years, Central Bank Vice Governor Turalay Kenç forecasted at the same meeting.
Kenç thanked Fitch for the upgrade, noting that for Fitch, Turkey is at the same level as Romania, South Africa, Mexico, Poland, Brazil and Indonesia. He said the growth rate in these countries was high before the current economic crisis. “This even continued after the financial crisis, but now it is time to talk about sustainability,” he said.
Turkey faced a strong shockwave at the end of 2010, he added. “An over-large capital flow came in and we increased the loan volume considerably. At one point the loan growth reached 35 percent or even exceeded it. So we had to overcome imbalances in the economy. The rapid growth distorted our balance of payments and prevented the competency of the currency,” Kenç said.
Ergin: Fitch upgrade not enough, judicial credibility needed
ANKARA - Hürriyet Daily News
Rating agency Fitch’s upgrade of Turkey to investment level on Nov. 5 is important, however the country should also focus on credible judicial implementation, particularly by eliminating lengthy judicial processes, Justice Minister Sadullah Ergin has said.
“[The Fitch upgrade] is important for Turkey, but additionally we need to make investors feel a sense judicial security to give them confidence to come and we need to provide such a service for them. We are making efforts toward that end,” Ergin said.
The minister’s remarks came in a speech delivered at a signing ceremony for a protocol between the Union of Chambers and Commodity Exchanges of Turkey (TOBB) and the Hatay Governorate, for the building of an imam hatip school, a religious vocational school, by TOBB in Hatay. “Today, trials before preliminary courts end reasonably quickly, but there is an extraordinary loss of time in appeals courts. With the reforms made in 2011 we saw – especially in the Supreme Court of Appeals along with the founding chambers for both the Supreme Court of Appeals and Council of the State – an increase in procurement of new members and reinforcement of judges and support personnel.