July 13 (Bloomberg) -- Turkey’s government is bracing for a possible second global economic decline caused by European debt problems, Deputy Prime Minister Ali Babacan said.
“The risk in Europe is growing,” he told reporters in Ankara today. “There’s a risk of a difficult period like 2009.”
Turkish gross domestic product fell 4.8 percent that year in the wake of the 2008 collapse of Lehman Brothers Holdings Inc. Ireland’s credit rating was cut to junk by Moody’s Investors Service yesterday after European finance ministers failed to reach a decision on how to stem the Greek crisis.
Turkey’s priority is to maintain fiscal discipline and prepare changes to the labor market that will make companies more productive and help reduce the current-account deficit, Babacan said.
“It’ll take some time for the structural reforms to start producing results, so if we have to live with a current-account gap, what matters now is that it’s sustainable,” he said.
The current-account shortfall in May more than doubled to $7.8 billion, bringing the 12-month cumulative total deficit to $68.2 billion, equivalent to about 9 percent of the government’s estimate for gross domestic product in 2011. The gap is the biggest risk to financial stability in the $740 billion economy, according to a central bank report in May.
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