IMF calls for reforms as it slashes Turkey growth forecast to 0.4%
The International Monetary Fund said Turkey should implement a swathe of measures to right its economy and finance industry as it slashed the nation’s growth forecast to 0.4 percent for next year.
“The challenges that Turkey faces will require a comprehensive policy package comprising monetary, fiscal, quasi-fiscal, and financial sector policies,” the Washington-based IMF said in its latest World Economic Outlook published on Tuesday.
The fund highlighted problems in monetary policy, which it said should be “tightened to re-anchor expectations”. The country’s central bank has reacted belatedly to faster inflation, it said.
Turkey’s economic downturn – its growth forecast for next year was cut from 4 percent-- was a key determinant for a broader downgrade of growth expectations for emerging markets, the IMF said.
Concern over an overheating economy and a crisis with the United States over imprisoned Americans has led to a slump in the lira’s value of about 40 percent this year. Inflation has surged to almost 25 percent and struggling banks have been forced to restructure tens of billions of dollars of foreign currency debt owed by energy companies, constructors and other businesses.
President Recep Tayyip Erdoğan has ruled out seeking help from the IMF to lift the economy out of the doldrums.
The IMF stressed that Turkey should adopt a more cautious approach to guaranteeing revenues and loans in private-public sector partnerships. Pledges to underwrite private sector debt, which has been used to finance mega construction projects such as airports, bridges and tunnels, should be gradually reduced and limited to “clear market failures”, the IMF said.
Turkish Treasury and Finance Minister Berat Albayrak, the son-in-law of Erdoğan, has announced a new economic programme designed to tackle inflation and re-balance the economy by focusing on export industries. He was due to announce extra measures to battle price increases on Tuesday.
The fund predicted that inflation would end this year at 15 percent and would be 16.7 percent in 2019. The current account deficit will narrow to 5.7 percent this year and 1.4 percent in 2019, the IMF said. The deficit stands at about 6 percent currently,