Turkey’s current-account deficit will exceed 7 percent of gross domestic product in the next three years even as economic growth slows, according to government forecasts.
The gap will peak at 9.4 percent of GDP this year and decline to 8 percent next year, falling to 7.5 percent in 2013 and 7 percent by 2014, Deputy Prime Minister Ali Babacan told reporters in Ankara today as he announced an updated medium-term economic plan. He said the budget deficit will narrow to 1.5 percent of GDP in 2012 from 1.7 percent this year, even as growth slows to 4 percent from 7.5 percent.
The central aim of government policy is to push Turkey into more “balanced” consumption habits and reduce its reliance on external financing of growth, Babacan said. The current-account deficit makes Turkey vulnerable to swings in external investment sentiment and is the biggest obstacle to the country achieving an investment-grade credit rating, according to companies such as Standard & Poor’s and Moody’s Investors Service.
“We have nothing to fear in Turkey, as long as our consumption avoids waste and focuses on return,” Babacan said, pledging to announce more “specific and concrete” steps to tackle the current-account gap in the months ahead.
The plan aims for a tighter budget than the program published last year, with debt to GDP declining from 39.8 percent at the end of this year to 35 percent in 2013 and 32 percent in 2014. The previous plan forecast debt of 36.8 percent in 2013.
Gas, Oil Imports
Babacan said the current account deficit won’t fall rapidly because the economy will continue to grow and depends on imported gas and oil for energy. Domestic savings are also low, which means Turkey is obliged to seek external financing, he said.
The government’s forecast for growth this year is “aggressive” and the adjustment in the current-account gap will be “sharper” than the program predicts, Yarkin Cebeci, an Istanbul-based economist for JPMorgan Chase & Co., said in an e- mailed report. “We see the deficit falling below the 7 percent mark before the end of the year.”
The predictions are based on the assumption that authorities in Europe will resolve their sovereign debt and banking problems quickly, Babacan said.
Tax increases on cars, alcohol, tobacco and mobile phones announced today will draw an additional 5.5 billion liras ($3 billion) in revenue, Finance Minister Mehmet Simsek said at the joint news conference. The increases are designed to discourage imports of luxury goods, he said.
The plan reflects a 12 percent increase in central- government spending, to 351 billion liras, while revenue grows 13 percent, to 330 billion liras.
The government’s budget and debt goals are “reasonable and positive in general,” Ozgur Altug, chief economist for BGC Partners in Istanbul, said in a report.
The government will pull in 12.5 billion liras from sales of its assets in 2012, compared with 4.3 billion liras this year, according to the plan, which was also posted on the website of the State Planning Organization.
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