Jul 16 2018

Turkey rebalancing won’t lead to sudden slowdown – adviser

Turkey’s economic rebalancing will not lead to a sudden drop in activity, said Cemil Ertem, Turkish President Recep Tayyip’s Erdoğan’s senior economic adviser.

As evidence, Ertem cited unemployment data for April, published on Monday, which showed the headline rate falling to 9.6 percent from 10.1 percent in March.

“Unemployment and youth unemployment are continuing to decline,” he said in a statement on Twitter. “It’s great that we now have single-digit unemployment, now it's time for the same for inflation.

“April unemployment figures show us that sustainable growth is also continuing, as of the start of the second quarter. Economic rebalancing will not occur with a sudden fall.”

Last week, Turkey pledged to lower inflation to single digits while ensuring sustainable economic growth rates. Investors are concerned that, despite the rhetoric, the government will not take the steps needed to tackle inflation, which surged to 15.4 percent in June, about four times the average of major emerging markets, from 12.2 percent in May. As a result, they have sold Turkish assets, leading to a slide in the lira to record lows.

While data published on Monday by the State Statistical Institute showed headline unemployment declining to the lowest level in more than two years, seasonally-adjusted unemployment rose to 10.3 percent in April from 9.9 percent in March.

After winning re-elections on June 24, Erdoğan and his governing Justice and Development Party (AKP) are preparing to fight local elections, set for March next year. Some investors fear that the prospect of more elections will encourage populism, compromising the fight against inflation and against a current account deficit that has widened to 6.5 percent of GDP, the largest in major developing countries.