Turkey’s “seat-belt warning lights are still on” as the economy makes a soft landing from high rates of growth, central bank Governor Erdem Basci said.
There has been a “healthy slowdown” in credit growth rates thanks to measures by the central bank and the banking regulator, Basci told executives in Edirne, western Turkey, in televised remarks. Still, the landing isn’t complete and the bank is watching Europe, “hopeful” that authorities there will be able to resolve their sovereign debt problems, he said.
Turkish gross domestic product expanded 1.3 percent in the second quarter from three months earlier, defying Basci’s predictions of a quarter of no growth. Annual growth for the period was 8.8 percent. Industrial output figures now point to a decline in both domestic and external demand, he said today.
“The net impact of our policy is one of tightening,” Basci said, saying that limits on lending and money supply cancel out a benchmark interest rate that is “supportive of the economy.”
The central bank cut its benchmark one-week repo rate by half a percentage point to 5.75 percent last month, saying easier conditions are needed to cushion the economy against a likely slowdown in Europe, Turkey’s biggest export market.
GDP may grow 7.5 percent this year, the International Monetary Fund said on Sept. 22 following a visit to Turkey. The Washington-based lender forecast 2.5 percent expansion in 2012.
Standard & Poors is tracking the economy’s “resilience” against the likely slowdown before it upgrades its rating for Turkish long-term foreign-currency debt, analyst Frank Gill said in an interview on Sept. 21.