Business calls for structural reforms
Güncelleme Tarihi:
Hurriyet Daily News with wires
Oluşturulma Tarihi: Haziran 20, 2009 00:00
BODRUM - Turkey’s business leaders meet with representatives of the government and the International Monetary Fund in the tourist resort of Bodrum. IMF’s John Lipsky hints that the fund wishes to finalize an accord with Turkey, while businesspeople voice concern on budgetary discipline.
High-profile participants at a meeting of Turkey’s top business association agreed the economy is on track to recover, but said the focus should turn toward steps to reduce the budget deficit.
The Turkish Industrialists' and Businessmen's Association, or TÜSİAD, held its High Advisory Council meeting Friday in the popular tourist resort of Bodrum. Economy Minister Ali Babacan, World Bank Vice President Ngozi Okonjo-Iweala and International Monetary Fund First Deputy Managing Director John Lipsky all attended the meeting.
The morning session opened with a speech by Mustafa Koç, the president of TÜSİAD’s High Advisory Council; Chairwoman Arzuhan Doğan Yalçındağ took the floor after him. Babacan and Lipsky also addressed the participants.
Danger of fiscal deficit
Though Turkey's economy may be on the verge of recovery, the rising fiscal deficit could hamper the rebound, Lipsky said, adding that Turkey, like other emerging markets, has experienced a severe contraction in output and economic activity.
Early indications of a recovery include a stabilizing Turkish Lira exchange rate, rebounding consumer confidence and increased lending to the private sector, but Lipsky said the rising fiscal deficit and weakening loan quality could cloud the economic outlook unless they are forcefully addressed.
Lipsky also reiterated the IMF’s readiness to support the government during the recovery. "My IMF colleagues and I share great optimism regarding Turkey's future, and we stand ready to help support Turkey in any way that we can," he said, making a veiled reference to the Fund’s wish to finalize a standby accord with the country.
The IMF director’s remarks came amid a flurry of market speculation that the government was close to signing a loan accord with the Fund. Lipsky met with Turkish officials in Ankara, where he arrived Thursday, and also held talks with Babacan in Bodrum, on the sidelines of the TÜSIAD meeting.
According to Lipsky, the IMF has projected the Turkish economy will shrink by at least 5 percent this year, but that overall, it has shown "resilience and flexibility" during the global downturn.
Speaking to reporters on the sidelines of the meeting, Lipsky said Turkey and IMF have a "convergence of views," while Economy Minister Babacan added that the views of the parties are "very close." Babacan said talks with IMF officials would continue in Ankara and Washington.
Call for an IMFaccord
Turkish business leaders, meanwhile, reiterated their calls for a new IMF accord and urged for a program to reduce the budget deficit as well as to promote growth. "The outcome of IMF negotiations will, without a doubt, be crucial in financing growth," Koç said. "The removal of uncertainty will contribute to [efforts for] paving the way of foreign resources and delayed investment spending."
TÜSİAD has concerns regarding the financial sources of new government incentives and employment packages earlier this month, Koç said. "The budget deficit will expand further if this new program functions with full speed," he said, adding that the financial burden of the new measures and its impacts on fiscal discipline should be "thoroughly discussed."
The highest-level government official in the meeting repeated his earlier comments that the economy managers are working on a mid-term program in a bid to soothe concerns, but Babacan also delivered a warning to the business world.
The government needs to steer clear of measures that would excessively constrain the economy, the minister said, adding that parliamentary regulations make it impossible to push through reforms, referring to the ability of the opposition to block the passage of laws.
"When we reveal the mid-term program, you will clearly be able to see which direction Turkey’s budget deficit will go this year, next year and following year; how we will build our fiscal policies and, as a result, whether Turkey will grow with or without debt stock control," Babacan said.
Babacan warned manufacturers not to take excessive risk with foreign currency borrowings, defining such a move as a "gamble" and recalling the last two economic crises, in 1994 and 2001, when many companies went bankrupt after the national currency plummeted against the U.S. dollar. The minister said the government would phase out tax cuts on cars and other items introduced earlier this year to help manufacturers weather the financial crisis and would re-examine the reductions in September.
The Turkish Industrialists' and Businessmen's Association, or TÜSİAD, held its High Advisory Council meeting Friday in the popular tourist resort of Bodrum. Economy Minister Ali Babacan, World Bank Vice President Ngozi Okonjo-Iweala and International Monetary Fund First Deputy Managing Director John Lipsky all attended the meeting.
The morning session opened with a speech by Mustafa Koç, the president of TÜSİAD’s High Advisory Council; Chairwoman Arzuhan Doğan Yalçındağ took the floor after him. Babacan and Lipsky also addressed the participants.
Danger of fiscal deficit
Though Turkey's economy may be on the verge of recovery, the rising fiscal deficit could hamper the rebound, Lipsky said, adding that Turkey, like other emerging markets, has experienced a severe contraction in output and economic activity.
Early indications of a recovery include a stabilizing Turkish Lira exchange rate, rebounding consumer confidence and increased lending to the private sector, but Lipsky said the rising fiscal deficit and weakening loan quality could cloud the economic outlook unless they are forcefully addressed.
Lipsky also reiterated the IMF’s readiness to support the government during the recovery. "My IMF colleagues and I share great optimism regarding Turkey's future, and we stand ready to help support Turkey in any way that we can," he said, making a veiled reference to the Fund’s wish to finalize a standby accord with the country.
The IMF director’s remarks came amid a flurry of market speculation that the government was close to signing a loan accord with the Fund. Lipsky met with Turkish officials in Ankara, where he arrived Thursday, and also held talks with Babacan in Bodrum, on the sidelines of the TÜSIAD meeting.
According to Lipsky, the IMF has projected the Turkish economy will shrink by at least 5 percent this year, but that overall, it has shown "resilience and flexibility" during the global downturn.
Speaking to reporters on the sidelines of the meeting, Lipsky said Turkey and IMF have a "convergence of views," while Economy Minister Babacan added that the views of the parties are "very close." Babacan said talks with IMF officials would continue in Ankara and Washington.
Call for an IMFaccord
Turkish business leaders, meanwhile, reiterated their calls for a new IMF accord and urged for a program to reduce the budget deficit as well as to promote growth. "The outcome of IMF negotiations will, without a doubt, be crucial in financing growth," Koç said. "The removal of uncertainty will contribute to [efforts for] paving the way of foreign resources and delayed investment spending."
TÜSİAD has concerns regarding the financial sources of new government incentives and employment packages earlier this month, Koç said. "The budget deficit will expand further if this new program functions with full speed," he said, adding that the financial burden of the new measures and its impacts on fiscal discipline should be "thoroughly discussed."
The highest-level government official in the meeting repeated his earlier comments that the economy managers are working on a mid-term program in a bid to soothe concerns, but Babacan also delivered a warning to the business world.
The government needs to steer clear of measures that would excessively constrain the economy, the minister said, adding that parliamentary regulations make it impossible to push through reforms, referring to the ability of the opposition to block the passage of laws.
"When we reveal the mid-term program, you will clearly be able to see which direction Turkey’s budget deficit will go this year, next year and following year; how we will build our fiscal policies and, as a result, whether Turkey will grow with or without debt stock control," Babacan said.
Babacan warned manufacturers not to take excessive risk with foreign currency borrowings, defining such a move as a "gamble" and recalling the last two economic crises, in 1994 and 2001, when many companies went bankrupt after the national currency plummeted against the U.S. dollar. The minister said the government would phase out tax cuts on cars and other items introduced earlier this year to help manufacturers weather the financial crisis and would re-examine the reductions in September.