Faik Öztrak said “CHP has been warning this government for six months along the lines of the conclusions of the recent World Bank report, which apparently—because it is said in Turkish—has been completely ignored by this government.” World Bank had commented on Turkey’s conditions in its recent Outlook 2012 Report:
“In scenarios where financing becomes tighter and re-financing of foreign debt becomes more difficult, some countries may either have to run down their foreign currency reserves or constrain domestic demand. These risks are particularly pronounced for countries like Turkey which have very high current account deficits, a short-term maturity profile and low level of F/X reserves.”
Öztrak added that “in the report, Turkey and Romania have suffered the largest cuts in 2012 growth forecasts. Six months ago, WB had predicted that Turkey would grow by 5.1% in 2012, now this has been revised down to 2.9%. A deceleration of growth from 8.2% in 2011 to 2.9% in 2012 amounts to a hard landing.
Also according to this report, Turkey is the only country among Europe and Eurasian economies that will suffer from higher inflation. Moreover in scenarios of credit bottlenecks, Turkey is deemed the 6th most vulnerable developing country in a universe of 30.
DB projects that in the geographical vicinity of Turkey net foreign financial flows will amount to US$76.3 billion. It would be very hard to maintain the US$65.4 billion current account deficit that AKP had forecasted in its 2012 macro-projections. We are facing either a sharp growth slowdown or a rapid exhaustion of Central Bank F/X reserves. The bill will paid by the Turkish citizens, currently being unwisely encouraged by AKP to borrow and spend more.”
“For the last six months, CHP had voiced very similar concerns to those of WB, which the PM has ignored completely. Perhaps, the English language warnings by WB will now be taken more seriously. AKP can’t restore confidence in the economy merely by enunciating a Medium Term Economic Program when the world is experiencing a severe bout of uncertainty. The failure of the Medium Term Economic Program is demonstrated by the interest rate paid on Turkey’s 10 year dollar denominated bond, where the Treasury was forced to pay 6.35%. At the same maturity USA pays 1.87%, Germany 1.93%. France and Spain, two countries the credit ratings of which have been cut very recently, had only paid 3.25% and %5.1 respectively.”
“AKP’s mismanagement of the economy caused loan rates for consumer to escalate to 20%. The cost of AKP’s neglect to adopt the measures suggested by CHP is rising rapidly and burdening an already overstretched citizenry.”