IMF: Pol­i­tics, debt tak­ing toll on Turk­ish econ­omy

Kuwait Times - - BUSINESS -

ISTANBUL:

In­creased po­lit­i­cal un­cer­tainty, a fall in tourism and high lev­els of cor­po­rate debt are tak­ing their toll on Turkey’s econ­omy, where growth is ex­pected to fall to 2.9 per­cent this year, the In­ter­na­tional Mone­tary Fund said yes­ter­day. The global lender also said Turkey’s cur­rent mone­tary stance, which bal­anced the need to con­tain in­fla­tion with a slow­ing econ­omy, should be main­tained with­out fur­ther eas­ing. The IMF is the lat­est for­eign in­sti­tu­tion to sig­nal con­cern about the po­lit­i­cal sit­u­a­tion in Turkey. Rights groups and some of Ankara’s West­ern al­lies have been alarmed by the crack­down that fol­lowed a failed coup in July, say­ing Pres­i­dent Tayyip Er­do­gan is us­ing the failed putsch to sti­fle dis­sent.

“The Turk­ish econ­omy has with­stood sev­eral shocks,” the IMF said in a state­ment fol­low­ing con­sul­ta­tions to as­sess its fi­nan­cial and economic state. “How­ever, in­creased po­lit­i­cal un­cer­tainty, a sharp fall in tourism rev­enues, and a high level of cor­po­rate debt are all tak­ing a toll.” Turk­ish au­thor­i­ties yes­ter­day or­dered the co-lead­ers of Turkey’s pro-Kur­dish op­po­si­tion Peo­ples’ Demo­cratic Party (HDP) to be ar­rested pend­ing trial, court of­fi­cials said, af­ter they were de­tained in a ter­ror­ism-re­lated in­ves­ti­ga­tion. The news drove the lira cur­rency to a record low against the dol­lar and sent stocks tum­bling.

The Fund said it ex­pected economic growth to fall to 2.9 per­cent this year, cit­ing weak busi­ness con­fi­dence and neg­a­tive do­mes­tic and ex­ter­nal shocks. It de­scribed un­em­ploy­ment as “high and ris­ing” and said un­cer­tainty had in­creased fol­low­ing the failed coup. That com­pares to 4 per­cent growth in 2015, a rate Fi­nance Min­is­ter Naci Ag­bal told Reuters in Septem­ber was un­likely to be matched this year. More than 110,000 civil ser­vants, aca­demics, judges, po­lice and oth­ers have been sus­pended or dis­missed fol­low­ing the failed coup, which Ankara blamed on fol­low­ers of a US-based Mus­lim cleric, Fethul­lah Gulen. Gulen has de­nied the ac­cu­sa­tion and con­demned the coup. Au­thor­i­ties have also stepped up a crack­down of those it ac­cuses of hav­ing links to the out­lawed Kur­dis­tan Work­ers Party (PKK). Se­cu­rity con­cerns have hit Turkey’s rev­enues from tourism, a ma­jor source of for­eign cur­rency.

RATES WARN­ING

The cen­tral bank last month kept in­ter­est rates on hold, cit­ing weak­ness in the lira cur­rency, paus­ing af­ter seven straight months of cuts and re­peated calls by Er­do­gan for cheaper credit. Er­do­gan, who wants low in­ter­est rates to spur spend­ing and bol­ster the econ­omy, has de­scribed him­self as an “en­emy” of in­ter­est rates. The IMF cau­tioned against fur­ther eas­ing. “The cur­rent mone­tary stance bal­ances the need to con­tain in­fla­tion against the back­drop of a slow­ing econ­omy, and should be main­tained,” it said. It also said a mod­er­ate fis­cal loos­en­ing was ap­pro­pri­ate, not­ing that should be ac­com­pa­nied by a cred­i­ble medi­umterm con­sol­i­da­tion plan. The IMF said it ex­pected in­fla­tion to re­main well above the gov­ern­ment’s 5 per­cent tar­get. Con­sumer prices rose 7.16 per­cent in Oc­to­ber, data showed this week, their slow­est growth in five months. — Reuters

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