Turkey unveils new economic program with ambitious growth target

14:25 | 02/10/2019 Global Economy

Turkey laid out on Monday a new three-year program for recovering its economy with ambitious targets including a surge in growth and a slowdown in inflation.

During a presentation in the capital Ankara, Turkish Treasury and Finance Minister Berat Albayrak said consumer price growth forecast has been revised to an annual 12 percent at the end of this year from 15 percent in August. Last year's government predictions were 15.9 percent for 2019.

Gross domestic product (GDP) will expand by 0.5 percent in 2019 and 5 percent during the following three years, he said.

The country's "inflation targets are set as 8.5 percent next year, 6 percent in 2021 and 4.9 percent in 2022," pointed out the minister. "We have achieved a soft landing," said Albayrak, adding that indicators suggested a recovery in the current third quarter, following three consecutive quarters of year-on-year contraction after last year's currency turmoil.

Albayrak said the growth will also generate around 1 million new jobs per year during the 2020-2022 period to reduce unemployment rate gradually.

"After closing 2019 with an unemployment rate of 12.9 percent, we aim to reduce the figure to 11.8 percent next year, 10.6 percent in 2021 and 9.8 percent in 2022," he said.

In recent weeks, international institutions have underlined Turkey's slow but robust recovery after its first recession in a decade, but also strongly insisted that there is still work to do.

Turkey's economy has recovered from the difficulties it experienced since the end of last year, but the country should undertake additional reforms because it remains vulnerable to a variety of risks, the International Monetary Fund (IMF) said on Sept. 23. "Turkey remains susceptible to external and domestic risks, and prospects for strong, sustainable, medium-term growth look challenging without further reforms," the IMF said in a statement after an official visit to the country.

The IMF explained that Turkey's economy has rebounded largely because of the implementation of a policy stimulus as well as favorable market conditions following the sharp lira depreciation and associated recession in late 2018.

The IMF pointed out that the positive market sentiment has provided Turkey an opportunity to enact additional reforms that would not only address existing vulnerabilities but would also strengthen policy credibility and set the economy on a higher and more sustainable growth path...

It would be still too early to assume the state of consumer prices for next year as the year-end figures have not been announced yet.

Last year's crisis chopped around 30 percent off the value of the lira and sent inflation in Turkey to a soaring 25 percent, leaving construction and other companies with large foreign currency loans deeply in debt. After a massive interest rate hike, the Turkish central bank has slashed 750 basis points in rates in the last two months to encourage domestic demand. But the recovery will be slow, warned analysts.

Albayrak also said on Monday that the budget will be used to finance what he called a production-based "transformation" of the economy amid investors' concerns that Ankara is lagging in structural reforms.

While the government struggles to balance its macroeconomic indicators, ordinary people are very vulnerable to price hikes despite a steady decreasing inflation.

Theo Xinhua