Turkey is determined to curb inflation and trim a yawning
current account deficit that widened in the first months of the
year, Turalay Kenc, deputy governor at the Central Bank of the
Republic of Turkey, told Emerging Markets.
Kenc said fighting inflation was one of our two core
Our objective is to bring [Turkeys] CPI down to
around 5.3% by the end of the year. We are confident we can hit
that target, he said. Consumer prices rose by 6.13%
year-on-year in April, down from 7.29% the previous month, but
analysts said they are likely to increase further.
The more pressing concern is the current account deficit.
Turkeys 5-5-5 plan a long-term effort
to cut inflation and the deficit to 5% while boosting gross
domestic product (GDP) by the same percentage is only
partially working. The current account deficit widened to 6.2%
of GDP at end-February 2013, from 5.9% at the end of last
Kenc voiced concern, noting that while it would be
very nice to bring [the deficit] down to 5%, that sort of
target doesnt look likely in the
Turkeys deficit disorder stems largely from the cost
of securing oil and gas: the country imports 97% of its energy,
mostly from Russia.
Timothy Ash, head of emerging market research ex-Africa at
Standard Bank, said that Turkey spent $55 billion on energy
imports in 2012, or 5% of GDP. Achieving energy sustainability,
in other words, would also balance the budget.
To offset that burden, Turkey signed a $22 billion deal last
Friday with a Franco-Japanese consortium to build the
countrys second nuclear power plant. A third plant is
likely to given the green light in the coming months.
There is one [plant] still pending, said Kenc.
These are important deals, necessary to create a
sustainably balanced economy, he added.
Last November Fitch, the rating agency, upgraded Turkey to
investment grade. Senior financial figures in Istanbul
contacted this week by Emerging Markets said
Moodys was likely to raise Turkeys credit rating to
investment grade before the year is out, with S&P following
On Wednesday Hans Blommestein, head of the OECDs bond
market and public debt management unit, said he could see
[no] reason that would block more rating upgrades
Underlying economic growth is also on the rise again. GDP
grew by just 2.2% in 2012, down from 8.5% the previous year,
though the European Commission recently raised its 2013 growth
forecast on the economy to 3.2% from 3%, and its 2014 forecast
to 4% from 3.8%.
Kenc said the economy was likely to grow by at least 3% this
year. Structural issues remain, the deputy central bank
governor admitted, but he said that Turkey was well on
the way to addressing them. We have a good population dynamics
and good productivity prospects. We have done a lot to get a
solid legal and financial infrastructure in place and ready for
Standard Banks Ash added: This is a very vibrant
long-term economic growth story, with good demographics, strong
public finances, good banks and a stable
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CORRECTION: A previous version of this story incorrectly
stated that Turkey's inflation target for the end of the year
is 6.2%. It is in fact 5.3%. This version also corrects the
2011 economic growth rate to 8.5%.