Rising joblessness, falling optimism signal crisis hits Turkish economy

Consumer confidence slumped 8 percent in October - to 74.24 points on the official index - while the jobless rate rose to 9.8 percent in August from last year’s 9.2 percent, the Turkish Statistics Institute (TURKSTAT) said on Monday.

 

The data, illustrating a sharp slowdown in Turkey's economy, followed signals at the weekend that the government and the International Monetary Fund (IMF) were moving closer to agreeing a new loan accord for the country.

 

According to figures, the total number of unemployed people in Turkey reached 2.43 million, while the number of unemployed in cities was recorded at 12 percent in August.

 

High unemployment and huge unregistered activity remain a major challenge for Turkey, despite several years of strong growth in the wake of two severe financial crises in 1999 and 2001.

 

The Consumer Confidence Index, which was 80.72 in September decreased by 8 percent and fell to 74.24 pct in October, TURKSTAT also announced in a separate statement.

 

The decrease in confidence stemmed from the deterioration in consumers' assessments concerning their purchasing power in the present and next period, the general economic situation in the next period, job opportunities in the next period and buying time condition of durable goods in the present period, the statement said.

 

DATA AFFIRMS SLOWING

"I think the data just affirms that the economy is slowing rapidly and that the government's growth assumption is unrealistic," Royal Bank of Scotland economist Timothy Ash told Reuters. "If they are going to cut a deal with the IMF they will have to revise their four percent growth assumption for 2009."

 

The government has said it expects 4 percent GDP growth this year and next. But private sector economists forecast growth of only around two percent next year. Gross domestic product rose 1.9 percent year-on-year in the second quarter, sliding from 6.7 percent in the first quarter.

 

Prime Minister Tayyip Erdogan signaled in Washington over the weekend that Turkey may be close to reaching a deal with the IMF to receive funds in case of an emergency which is also seen to attract greater confidence in the economy.

 

IMF Managing Director Dominique Strauss-Kahn said at the weekend that the fund had not reached an accord for a new loan deal for Turkey but that a package was close.

 

Turkey has been holding talks with the fund for a potential precautionary stand-by loan to partly address market worries, while also trying to convince the IMF to loosen conditions for such a deal. Erdogan earlier said that Turkey did not want to agree a fresh IMF deal if it imposed excessive spending constraints.

 

Economists say government attention is currently focused on local elections in March, discouraging moves to revise spending plans.

 

Turkey's last $10 billion stand-by accord with the IMF expired in May.

   Â