Turkey economy under pressure
News Article Date: Monday 06th of July 2009
The Oxford Business Group, a leading publisher of economic and political intelligence in Britain, said Turkey's economy was under pressure due to the global crisis. The group said Turkish economy was shrinking primarily due to a slump in internal and external demand and forecast the year-end contraction to be around 5 to 5.5 percent.
The outlook is more optimistic than that of the Organization for Economic Cooperation and Development (OECD), which in a June 24 report predicted that the Turkish economy would contract by 5.9 percent in 2009 and then grow by 2.6 percent in 2010. The OECD said this growth would be helped along through trimmed interest rates and tax reductions for the private sector but cautioned that these growth-spurring measures would be largely dependent on the government's ability to commit to austerity measures and reaching an agreement with the International Monetary Fund (IMF).
The financial sector in Turkey, the report implied, would not be negatively affected despite an economic downturn.
Referring to OECD documents, the report implied that markets were expecting Turkey to sign a deal with the IMF worth up to $45 billion whereby the government would be bound to strict spending controls and would be provided with a strong and reliable income stream that could be used, amongst other things, to bridge the external financing gap.
The Oxford Business Group warned, however, that there was far from consensus on whether or not an IMF agreement would be reached. The IMF and the Turkish government have been locked in negotiations for some months now as the two parties cannot agree on a number of issues, including the need to increase an autonomous taxing administration and the IMF's demands that Turkey implement tougher austerity measures.
The group also said that although the Turkish government was opposing IMF measures that could contract the Turkish economy, the two parties could reach a compromise.
The group said the European market's expected recovery in 2009 would help pull Turkey out of recession because the EU absorbs more than 50 percent of Turkey's exports. Sagging international demand for Turkey's exports have been identified by many as being one of the principal culprits behind Turkey's record 13.8 percent economic contraction in the first quarter of 2009.
The report also pointed to the tourism sector as being fairly resistant to the crisis -- down only 0.7 percent year on year -- and that this would be one of the strongest sources of foreign currency, also helping Turkey reduce the effects of the crisis in 2009.
The Oxford Business Group is a leading publisher of economic and political intelligence on the markets of Eastern Europe, Africa, the Middle East, the Caribbean and Asia. Through its range of print and online products, the OBG offers comprehensive and accurate analysis of political, macroeconomic and sectoral developments, including banking, capital markets, energy, infrastructure, industry and insurance