Turkey needs more reforms to raise growth: Deputy PM Şimşek

Turkey needs more reforms to raise growth: Deputy PM Şimşek

Turkey needs more reforms to raise growth: Deputy PM Şimşek

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Turkey needs to implement further economic reforms to set it on a path of higher growth, Deputy Prime Minister Mehmet Şimşek said on Sept. 8, as reported by Reuters. 

“[A] further reform effort is needed to enable Turkey to [get] back to [a] high economic growth track… Turkey is on the brink of a high growth period based on research and development [R&D] and innovation,” he said at the launch meeting for home accounts and state contributions in Ankara, as quoted by Reuters.

Leading economy ministers have recently voiced that Turkey would likely grow by around 4 percent over this year.

Economist have stated the government needed to move faster on promises to implement reforms aimed at boosting productivity in education, labor, governance and taxation.

Driving up household, corporate savings

Şimşek also noted that Turkey would drive up household and corporate savings with the help of “very strong” incentives and there would be no unnecessary government spending.

“The Prime Minister [Binali Yıldırım] has ordered us to continue saving, and the government will keep it tight. With very strong incentives, household savings will increase, and the reforms will encourage corporate savings as well,” he added. 

Şimşek noted that Turkey’s saving rate-to-GDP was 15.6 percent last year, lower that the world average at 25 percent. 

“Private sector savings declined from around 20 percent to 11 percent over the last 16 years, as uncertainties have eased,” he added. 

Additional 100-bln-lira contribution

He also noted that the government expected an additional 100 billion Turkish Liras ($34 billion) in savings in the next decade with the launch of a new reform in August, which stipulated the automatic inclusion of employees to the private pension system, dubbed BES in Turkey. 

The bill which envisaged the automatic inclusion of all Turkish wage-earners under the age of 45 into the private pension plan will enter into force by Jan. 1, 2017.

Employers will include their employees in a pension system offered by a company authorized by the Treasury in line with the new regulation.

The contribution margin of the employee will equal some 3 percent of the actual premium yield. The cabinet will be able to double this amount, decrease it to 1 percent or put a fixed limit on the contribution margin.

Workers who do not want to use the plan will be able to exit during a two-month period, and their savings will be returned. 

The state makes some 25 percent contribution to each system participant’s savings.