Weak growth among trading partners is the major threat to Turkey’s economy, Finance Minister Mehmet Simsek said.
Recovering domestic demand, encouraged by government policies, is offsetting the slump in export growth caused by the deepening recession in the euro area and slowdown in emerging economies, Simsek told reporters in Ankara today.
Still, “no matter how competitive you are and how hard you try, demand from the other side is necessary,” Simsek said of exports. “Developments in the Middle East and Europe as well as global economic factors are affecting exports negatively.”
The euro area, Turkey’s main trade partner, is expected to shrink by 0.6 percent this year, he said.
Turkey’s gross domestic product grew by 3 percent during the first quarter, after a below-target 2.2 percent in 2012. The International Monetary Fund cut its forecast for this year’s global growth to 3.1 percent, over weakness in emerging markets.
In an effort to stimulate growth, the government has given exporters more time to repay loans to Export-Import Bank, Simsek said. Exports during the first six months grew by 2.5 percent from the same period last year to $74.6 billion, according to the Turkish Exporters’ Assembly.
Urban redevelopment plans, privatization of government assets and new incentives to invest in Turkey’s underdeveloped regions will also boost growth, which maintained momentum during the second quarter due to recovery in domestic demand, the minister said. A stable core inflation ranging between 5.5 percent and 6 percent, indicates a slowdown in headline inflation, which accelerated to 8.3 percent in June, Simsek added.
“Growth of 3 percent in the first quarter may look moderate by Turkey’s own standards but that was still among the highest in all Europe,” Simsek said.
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