OECD warns Turkey over rising tension, inflation and slow growth
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Turkey's tensions arose, growth slowed down and the inflation expectations increased and the government should take steps to tackle such challenges, OECD said on Thursday.
OECD added risks of inflation, slower growth and political noise had hightened with the loss of competitiveness in large areas of the country's economy, the deterioration of international conditions, and a weakening of confidence domestically, Paris-based organization said in its economic survey of Turkey 2008.
"New government initiatives to strengthen the macroeconomic policy framework, and upgrade the competitiveness of industry and its capacity to create jobs, would help the economy resume a stronger growth course," the report said.
OECD said the main challenges are the preserving the gains of fiscal consolidation, the inflation targeting framework, reducing barriers to formal employment in the report.
In the area of fiscal policy, the gains of recent fiscal-institutional reforms and vigorous fiscal consolidation should be preserved, and credibility enhanced, in the wake of transition from International Monetary Fund (IMF) monitoring, it said.
"This can be achieved by enforcing multi-yearly spending ceilings combined with a primary surplus target, aimed at continuing to reduce the public debt ratio," OECD warned.
Turkey has not decided yet to make its final decision on a follow-up deal with the after the $10 billion stand-by loan deal that expired in May but expects to make it clear in August when the fund release its report on the country.
The report also said in the area of monetary policy, "the disinflation strategy of the Central Bank needed the support of more comprehensive policies to improve inflation expectations".
Inflation reached the double-digit rate again after 13 months in May, while the consumer prices hit the rate of 10.61 percent in June.
Turkey implemented a a fundamental fiscal, monetary and institutional reform package after the most severe of a succession of “boom and bust” cycles in 2001. This reform package backed by a favourable international environment and by the opening of accession negotiations with the EU, led Turkey achiving an average growth rate of almost 7 percent during the period of 2002-2007.