Turkey's Economy Poised for Recovery

Monday June 22nd, 2009

The International Monetary Fund's deputy managing director, John Lipsky, said yesterday that Turkey's economy was showing signs of improving from the shock of the global economic crisis.

"In line with recent global developments, some hopeful signs are visible on the economic horizon," Mr Lipsky told the Turkish industrialists and businessmen in Bodrum, Turkey, according to the prepared text.

Mr Lipsky cited several indicators that "suggest that the Turkish economy may be on the verge of recovery."

He highlighted the banking sector's "strong capitalisation" and "robust profits", a sharp rebound in consumer confidence and improved investor sentiment toward emerging markets that has helped to stabilise the exchange rate of the lira.

He also noted that the large corporations in the country had "held up fairly well" because they had little debt, declines in manufacturing and employment had begun to be reversed, and "lending to the private sector has gained positive momentum".

"However, the rising fiscal deficit and weakening loan quality could - if not addressed forcefully - cloud the growth outlook, including by curtailing banks' ability to extend credit," said the number two IMF official.

Mr Lipsky did not mention the status of prolonged discussions between Ankara and the IMF on a possible loan.

Caroline Atkinson, speaking for the IMF, said on Wednesday at a news conference at the institution's Washington headquarters that the IMF was continuing to hold talks with Turkish authorities to determine whether they will seek aid.

Turkey has been negotiating with the IMF for a new three-year stand-by deal since a $10 billion programme expired in May 2008.

Turkish Prime Minister Recep Tayyip Erdogan indicated last week that the country could do without fresh stand-by credit from the IMF and was strong enough to weather the global downturn.

"We are not obliged to a deal. Will we die if we do not have the IMF? If need be, we can tell them that the deal is not going to happen.

Turkey has that strength," the Prime Minister said in an interview with the NTV news channel. The IMF estimates that Turkey's economic activity will decline by at least five per cent this year amid the global financial and economic crisis.

Turkey will host the annual meetings of the IMF and its sibling institution, the World Bank, in Istanbul in October.

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