Wednesday, July 6, 2011
ISTANBUL - Hürriyet Daily News
Turkish cabinets’ Economy Coordination Board will focus on the nation’s current account gap and seek more control on the Central Bank, accoring to experts
 Deputy PM Ali Babacan will head a team of four other ministers in the new Turkish cabinet. |
A new Cabinet has entrusted Turkey’s finances and economy to an experienced team that will likely look to address the country’s growing current account deficit and exert more control over the Central Bank, according to commentators.
The new team led by Ali Babacan will focus on the country’s current account deficit, a risky gap that ballooned to more than $60 billion, or about 8 percent of gross domestic product in the 12 months through March, said economists. The government forecast had been $42 billion for the year.
The masters of Turkey’s economy will also seek more control on institutions such as the Central Bank, the Banking Regulation and Supervision Agency, or BRSA, and other regulatory bodies, several experts told the Hürriyet Daily News.
Excluding Environment and Urban Planning Minister Erdoğan Bayraktar, the head of a newly launched chair in the Cabinet, all ministers related to the economy are from the former Cabinet.
Still, a change of roles was a surprise for many.
Former State Minister Zafer Çağlayan, who was responsible for foreign trade, will be the new economy minister.
Çağlayan often criticized the Central Bank’s policies to cool down the economy at his former post, as he was a defender of a weaker Turkish Lira to boost exports.
“We remember the criticisms of Çağlayan,” İnan Demir, chief economist at Finansbank, told the Daily News on Wednesday.
Despite the “lack of compatibility” between Çağlayan and the Central Bank, “it’s compulsory for both institutions to work collaboratively,” said Demir.
The new economy minister will need to soften his rhetoric on the Central Bank sooner or later, he said. “The new responsibilities on his shoulders should push him to do so.”
İnan also noted that Babacan would continue his control over the seat as he would serve as the head of the Turkish Economy Coordination Board, another new body within the government.
Finance Minister Mehmet Şimşek and Development Minister Cevdet Yılmaz, Science, Technology and Industry Minister Nihat Ergün are the three other ministers on the board.
“The new government will aim to have more control over the Central Bank,” said Demir.
Despite not being included in the new board, Bayraktar, former chairman of the Housing Development Administration, or TOKİ, is another member of the new economy and finance team.
Banu Kıvcı Tokalı, chief economist at Destek Securities, told the Daily News that the appointment showed the importance the government attached to the construction sector.
“As the construction sector remains the driving force of consumption and employment in the country, it will be among the priority of the new government,” Tokalı said.
The government will continue a sustainable growth policy, trying to avoid overheating. In order to decrease the growth rate and stabilize it around 5 or 6 percent, the government increased the control over the housing sector, she said.
Evaluating the new economy team, Tokalı said, “There is not much surprise,” adding that Çağlayan will “eventually follow the footsteps of Babacan who is favored by financial actors in the country.”
“When it comes to good results, the Central Bank gets awards and applause,” Çağlayan said during a meeting in the northwestern province of Bursa in September 2010. “What about the bill of pressure on Turkish exporters and the current account deficit caused by the exchange rates?”
At the same meeting, he described the Central Bank as “a car on the opposite line,” calling the bank to increase the control over the floating exchange regime in order to support the Turkey’s exporters’ competitiveness.
Responding questions by journalists during a press meeting to announce the new cabinet, Recep Tayyip Erdoğan said Wednesday there was no need to be concerned about the nation’s current account deficit.
Still, the gap “floats around the alarming level,” Veyis Fertekligil, the chief economist of T-Bank told the Daily News in a phone interview.
Fertekligil said Babacan was likely to remain in charge of the economic performance of the country as Çağlayan would focus on “curbing the current account deficit” through various measures such as new incentives for Turkish exporters. “The economy needs a wider reform,” he said, adding that Turkey’s midterm fiscal program was expected to be renewed by the third quarter of this year. “It has to focus more on the alarming current account deficit.”
The new team led by Ali Babacan will focus on the country’s current account deficit, a risky gap that ballooned to more than $60 billion, or about 8 percent of gross domestic product in the 12 months through March, said economists. The government forecast had been $42 billion for the year.
The masters of Turkey’s economy will also seek more control on institutions such as the Central Bank, the Banking Regulation and Supervision Agency, or BRSA, and other regulatory bodies, several experts told the Hürriyet Daily News.
Excluding Environment and Urban Planning Minister Erdoğan Bayraktar, the head of a newly launched chair in the Cabinet, all ministers related to the economy are from the former Cabinet.
Still, a change of roles was a surprise for many.
Former State Minister Zafer Çağlayan, who was responsible for foreign trade, will be the new economy minister.
Çağlayan often criticized the Central Bank’s policies to cool down the economy at his former post, as he was a defender of a weaker Turkish Lira to boost exports.
“We remember the criticisms of Çağlayan,” İnan Demir, chief economist at Finansbank, told the Daily News on Wednesday.
Despite the “lack of compatibility” between Çağlayan and the Central Bank, “it’s compulsory for both institutions to work collaboratively,” said Demir.
The new economy minister will need to soften his rhetoric on the Central Bank sooner or later, he said. “The new responsibilities on his shoulders should push him to do so.”
İnan also noted that Babacan would continue his control over the seat as he would serve as the head of the Turkish Economy Coordination Board, another new body within the government.
Finance Minister Mehmet Şimşek and Development Minister Cevdet Yılmaz, Science, Technology and Industry Minister Nihat Ergün are the three other ministers on the board.
“The new government will aim to have more control over the Central Bank,” said Demir.
Despite not being included in the new board, Bayraktar, former chairman of the Housing Development Administration, or TOKİ, is another member of the new economy and finance team.
Banu Kıvcı Tokalı, chief economist at Destek Securities, told the Daily News that the appointment showed the importance the government attached to the construction sector.
“As the construction sector remains the driving force of consumption and employment in the country, it will be among the priority of the new government,” Tokalı said.
The government will continue a sustainable growth policy, trying to avoid overheating. In order to decrease the growth rate and stabilize it around 5 or 6 percent, the government increased the control over the housing sector, she said.
Evaluating the new economy team, Tokalı said, “There is not much surprise,” adding that Çağlayan will “eventually follow the footsteps of Babacan who is favored by financial actors in the country.”
“When it comes to good results, the Central Bank gets awards and applause,” Çağlayan said during a meeting in the northwestern province of Bursa in September 2010. “What about the bill of pressure on Turkish exporters and the current account deficit caused by the exchange rates?”
At the same meeting, he described the Central Bank as “a car on the opposite line,” calling the bank to increase the control over the floating exchange regime in order to support the Turkey’s exporters’ competitiveness.
Responding questions by journalists during a press meeting to announce the new cabinet, Recep Tayyip Erdoğan said Wednesday there was no need to be concerned about the nation’s current account deficit.
Still, the gap “floats around the alarming level,” Veyis Fertekligil, the chief economist of T-Bank told the Daily News in a phone interview.
Fertekligil said Babacan was likely to remain in charge of the economic performance of the country as Çağlayan would focus on “curbing the current account deficit” through various measures such as new incentives for Turkish exporters. “The economy needs a wider reform,” he said, adding that Turkey’s midterm fiscal program was expected to be renewed by the third quarter of this year. “It has to focus more on the alarming current account deficit.”
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