Turkish executives concerned about economic growth policy

The chief financial officers of Turkish companies are expressing concern about the government’s goal for economic growth this year, according to Dünya newspaper.

The government is planning to grow the economy by 5 percent in 2020 but investment by companies remains at low levels.

Leading local economist Ali Ağaoğlu, speaking to Dünya’s Hakan Güldağ, said economic stimulus planned by the government is reminiscent of policies followed prior to a currency crisis that erupted in the summer of 2018, when Turkey used cheap loans under a credit guarantee scheme to boost business activity.

“Everybody is looking at whether the same problems will emerge as we saw when the economy grew 7.4 percent in the Credit Guarantee Fund (KGF) period,” Ağaoğlu said.

A government-backed campaign by state-run banks to lend at interest rates below the central bank benchmark rate looks like just another version of the credit expansion observed during the KGF period, Ağaoğlu said.

Turkey’s lira slumped to a record low below 7.2 per dollar in August 2018 and went on to lose 28 percent of its value that year. Many economists said the foundations of the crisis were laid by government policy, which caused so-called “economic overheating”.