ISTANBUL- Hürriyet Daily News
The IMF’s recent forecast on the Turkish economy, which includes a slowdown and a need for interest rate cut, is not appreciated by Turkish economists speaking to the Daily News. ‘They should really stop comparing Turkey with Bulgaria and Romania,’ says one. The reputation of the IMF has been damaged, adds another
The World Economic Outlook report by the IMF says Turkey will grow 7.27 percent this year before a 2.5 percent growth in 2012. Turkish economists think such a contradiction in the Turkish economy is not logical. DHA photo
Several Turkish economists on Friday remained critical of the latest International Monetary Fund, or IMF, forecasts for Turkey, which predicted a soft landing in the Turkish economy and advised the country to fight inflation and raise key interest rates.
“Unfortunately, Western economists do not understand what Turkey has been trying to do,” Turkish economist Deniz Gökçe said, adding that Turkey has no problems with its fiscal policy.
The IMF revised its forecast for a “soft landing” for Turkey from 7.5 percent gross domestic growth by the end of this year following with 2.5 percent growth in 2012 in its World Economic Outlook report revealed at an Istanbul meeting on Friday.
“The IMF sees quarter-on-quarter seasonally-adjusted growth remaining positive,” said Mark Lewis, senior president representative of the IMF in Turkey, speaking at the meeting, where IMF officials tried to avoid commenting on issues particularly related with Turkey.
Still, Lewis said that Turkish inflation may exceed the Central Bank’s year-end forecast of 7.27 percent and urged authorities to restore credibility by raising rates and dropping “innovative” policies.
The Turkish Central Bank has the interest rate set at a historic low of 5.75 percent.
“Turkey has done exceptionally well bringing down inflation but still needs to do more,” Lewis told the Hürriyet Daily News on the sidelines of the meeting.
The IMF revised its growth forecast to 7.27 from 6.6 percent earlier. The fund also revised Turkey’s growth forecast for 2012 to 2.5 percent from 2.2 percent. Turkish financial authorities have room to tighten policy, the report said.
Disagreeing with IMF forecasts, Gökçe said, Europe needs to crush economically to have such a contradiction in Turkish economy. “They should really stop comparing Turkey with Bulgaria and Romania.”
“Turkey increased the reserve requirement ratio and dropped the overnight interest from 5 percent down to 1.5 percent, and [the IMF] did not understand this policy,” he told the Daily News in a phone interview on Friday. “In order to fight against the current account deficit, Turkey has started an expansionary fiscal policy and they have not understood us.”
Nurhan Toğuç, chief economist of Ata Invest based in Istanbul, also strictly disagreed with the IMF. Talking about the IMF’s call to restore credibility by raising rates, Toğuç told the Daily News that “having no debt problem and growing through domestic growth, I do not understand why Turkey needs to raise interest rates at all. The advice from the IMF is meaningless.”
Toğuç said the IMF’s recommendation to Turkey to raise the interest rates to a level higher than in Europe and the United States implied more benefits for Western investors in Turkey. “Unfortunately, the reputation of the IMF has been damaged,” Toğuç said.
The IMF’s advice for Turkey included a halt in selling U.S. dollars in a bid to support lira. However, news reports by Bloomberg from three emerging powers imply an opposite policy.
Intervention on currencies
India’s central bank may intervene in the foreign-exchange market if the rupee falls to levels seen during the global credit crisis, a Finance Ministry official said in New Delhi on Friday, the agency reported. Policy makers in South Korea and Indonesia also signaled they will intervene to curb currency losses.
“All Asian central banks will work to limit losses in their currencies as long as extreme volatility is prevalent,” said Emmanuel Ng, a currency strategist at the Oversea-Chinese Banking Corp. in Singapore. “Over the last few years, the accumulation of foreign reserves has happened at a fair pace, so the buffer is definitely comfortable.” k HDN
Nurdan Bozkurt from Istanbul contributed to this report.