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Spotlight: Turkish gov't raises hope in economy by confidence-building steps
Last Updated: 2018-07-27 07:12 | Xinhua
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The Turkish government's efforts to boost confidence in the economy raise hopes that the country may avoid a crisis by prudent management.

The man in charge of Turkey's economy, Berat Albayrak, has been careful to act, since his nomination about two weeks ago, in a way to win the trust of foreign lenders as well as businesses at home.

All the steps taken by Albayrak will have positive effects on the economy, Cem Kilic, an economist who formerly taught at Gazi University, told Xinhua.

The Ministry of Treasury and Finance headed by Albayrak will draw up a comprehensive medium-term economic program by September after consultations with various stakeholders in the economy.

After attending the G20 Meeting of Finance Ministers and Central Bank Governors in Argentina, the minister had two consultation meetings separately with economists and businessmen earlier this week.

Following the G20 meeting, Albayrak said the government would work in harmony with the markets on a win-win basis rather than fight with them.

The minister also indicated that fighting inflation would be a major theme in the economic program.

"Such steps will boost confidence in Turkey," said Kilic.

Turkey's economy suffers from a record-high inflation of 15 percent, a chronic unemployment rate of around 10 percent and a yearly current account deficit of nearly 60 billion U.S. dollars.

The economy managed however to grow by 7.4 percent last year. Yet, leading international financial institutions expect the growth rate to slump to around 4.5 percent this year.

In the days that immediately followed President Recep Tayyip Erdogan's nomination of Albayrak, his son-in-law, the Turkish lira lost in value against the U.S. dollar.

The lira's slump was widely seen as distrust by the international financial markets towards Albayrak as chief of economy.

However, the minister's statements since the G20 meeting of last weekend have been largely positively perceived.

Faruk Sen, president of the Istanbul-based Turkish European Foundation for Education and Scientific Studies, feels the misgivings foreign lenders have about Albayrak still persist.

However, Sen, also an economist, also said to Xinhua that the minister has done his best to win the trust of global markets.

Fiscal discipline and economic growth are two other leading themes in the government's economic policy.

Steps have already been taken to cut down public spending which had also been encouraged earlier in the year by last month's presidential and parliamentary elections.

Turkey needs to succeed in reducing inflation without increasing the lending rates and set the ground for inflow of foreign capital into the country, Sen remarked.

The Turkish central bank kept its policy rate constant at 17.75 percent in a meeting earlier this week despite expectations of an increase of at least around 1 percent.

"The central bank acted intelligently," said Sen, noting that interest rates should not be allowed to increase for the inflation to be lowered.

However, he also added that people should not, due to fears that the U.S. dollar may increase in value, rush to buy dollars which may hinder the central bank's plan to work.

President Erdogan is known to strongly oppose any rise in interest rates as that would hamper economic growth.

Following the central bank's decision, the Turkish Lira, which has lost around 25 percent of its value so far this year, dropped from around 4.75 to over 4.9 against the dollar. Then it stabilized at around 4.8.

The central bank's decision to not raise rates should not be taken negatively by the international markets, which is what the bank should have done, said Kilic.

Turkey's economy needs foreign loans as much as around 240 billion dollars in the next 12 months to pay debts and keep the economy running.

According to the media, there has been a significant outflow of foreign capital from Turkey in recent months. Some local firms are also said to have done the same in an apparent feeling of unpredictability in the economy.

For the government to attract foreign capital, it should first focus on creating the conditions to stop the local businesses from transferring capital abroad, stated Sen.

Some argue the Turkish economy may be overheated and need comprehensive structural reforms to cope with a nearing crisis.

As opposed to the period before the June 24 elections, with which Turkey has fully switched to a strong executive presidency, Albayrak is now the sole chief of the economy. Many feel this will facilitate the management of the economy by making coordination much easier.

According to data by Turkey's statistical authority at the beginning of the week, consumers' confidence in the Turkish economy has gone up in July by 4 percent.

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