Turkey sent a new signal of pressures squeezing its economy on Wednesday, warning it may cut the growth outlook a day after a juggling act with interest rates to shore up the lira.
The moves came just a week after Prime Minister Recep Tayyip Erdogan sought to reassure investors that their capital was safe in Turkey, where weeks of deadly protests had posed the biggest challenge faced by the Islamic-rooted government during its decade-long rule.
Finance Minister Mehmet Simsek said that the growth forecast of 4.0 percent this year, half the rate two years ago, might have to be lowered because of U.S. monetary policy and recession in the eurozone.
The minister, speaking on news channel NTV, referred to signals from the United States that the Federal Reserve will eventually wind down special injections of money to stimulate the U.S. economy.
Some of this money had gone into emerging markets in search of higher returns, but has now begun to flow out, pushing down emerging stocks and currencies and raising their borrowing rates.
Simsek said: “Fed decisions and the international market conditions have triggered risks for a (growth) downgrade.”
Weak demand from the debt and recession-hit eurozone, Turkey’s biggest trading partner, was also hurting Turkish exports, he said.
Turkey, which has grown to become about the 17th-biggest economy in the world in the past decade after a severe financial crisis and IMF rescues, remains extremely vulnerable to rapid flows of foreign capital.
Investors were also jittery after weeks of protests which began on May 31 after police brutally broke up a peaceful sit-in in Istanbul.
The minister’s warning came the day after the central bank raised the overnight rate by 0.75 percent to 7.25 percent but held the key rate at 4.5 percent to which it was reduced in May.
The lira then rallied.
The bank had already signaled a change of direction on rates, which would normally raise the attractions of the lira and retain capital but also crimp economic activity, and its solution had been broadly expected by analysts.
The policy statements are seen as reflecting various pressures: the government wants low rates to support growth, while some circles in Turkey have argued for a rate rise to support the lira.
In May, the prime minister attacked them as “speculators” and the “interest rate lobby.”
But foreign analysts have been strongly skeptical for weeks that Turkey is on top of external pressures, a balance of payments deficit and unease over serious civil unrest in May and June.
نستخدم ملفات الكوكيز لنسهل عليك استخدام مواقعنا الإلكترونية ونكيف المحتوى والإعلانات وفقا لمتطلباتك واحتياجاتك الخاصة، لتوفير ميزات وسائل التواصل الاجتماعية ولتحليل حركة المرور لدينا...اعرف أكثر