ISTANBUL, Jan 1 (Reuters) - Turkey's current account deficit will pose more of a risk than inflation in 2011 but the country will uphold financial stability and keep the deficit in check by monitoring credit growth, the Economy Minister said.
In an interview with state-run news agency Anatolian on Saturday, Ali Babacan contrasted Turkey's economic strength with the fragile state of many debt-ridden members of the euro zone, and threw his support behind a recent policy shift by the central bank.
'We will not hesitate to take the most rigid measures for stability. The central bank has given its signals. When you read their statement you will see there are more steps on the way. They will make decisions in January.'
Turkey's central bank in December cut its policy rate by 50 basis points to 6.5 percent in a bid to deter higher-yield seeking inflows of hot money. At the same time it raised required reserve ratios to mitigate credit growth in Turkey's fast-growing domestic economy.
Soaring import growth compared with only feeble export recovery in Turkey and huge inflows of portfolio funds have driven up Turkey's current account deficit.
In the first ten months of the year the deficit, traditionally an economic weakspot for Turkey in times of expansion, widened to $35.7 billion, according to the Turkish Statistics Office, a rise of more than 350 percent.
The government said in its mid-term economic plan it forecasts the deficit at 5.4 percent of GDP in 2010.
'A current account deficit of 5-6 percent of GDP is acceptable, but if there is credit growth of more than 25 percent...there is a risk of the current account deficit rising more than 5-6 percent. We must pay attention to this during 2011,' Babacan said.
'Credit growth in 2010 was around 125 billion lira, and we want it to increase by more or less the same amount in 2011? higher growth could create problems with macro balances, Turkey is more concerned with the current account deficit than inflation.'
Energy-hungry Turkey relies on imports of oil and gas, which have also driven up the deficit.
'Turkey should have at least three nuclear power plants by 2023. The most concrete steps we can take to solve our current account deficit in terms of energy will be to build nuclear power plants,' Babacan said.
(Reporting by Alexandra Hudson) Keywords: TURKEY ECONOMY (alexandra.hudson@reuters.com; +90 212 350 7062; Reuters Messaging: alexandra.hudson.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2011. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
In an interview with state-run news agency Anatolian on Saturday, Ali Babacan contrasted Turkey's economic strength with the fragile state of many debt-ridden members of the euro zone, and threw his support behind a recent policy shift by the central bank.
'We will not hesitate to take the most rigid measures for stability. The central bank has given its signals. When you read their statement you will see there are more steps on the way. They will make decisions in January.'
Turkey's central bank in December cut its policy rate by 50 basis points to 6.5 percent in a bid to deter higher-yield seeking inflows of hot money. At the same time it raised required reserve ratios to mitigate credit growth in Turkey's fast-growing domestic economy.
Soaring import growth compared with only feeble export recovery in Turkey and huge inflows of portfolio funds have driven up Turkey's current account deficit.
In the first ten months of the year the deficit, traditionally an economic weakspot for Turkey in times of expansion, widened to $35.7 billion, according to the Turkish Statistics Office, a rise of more than 350 percent.
The government said in its mid-term economic plan it forecasts the deficit at 5.4 percent of GDP in 2010.
'A current account deficit of 5-6 percent of GDP is acceptable, but if there is credit growth of more than 25 percent...there is a risk of the current account deficit rising more than 5-6 percent. We must pay attention to this during 2011,' Babacan said.
'Credit growth in 2010 was around 125 billion lira, and we want it to increase by more or less the same amount in 2011? higher growth could create problems with macro balances, Turkey is more concerned with the current account deficit than inflation.'
Energy-hungry Turkey relies on imports of oil and gas, which have also driven up the deficit.
'Turkey should have at least three nuclear power plants by 2023. The most concrete steps we can take to solve our current account deficit in terms of energy will be to build nuclear power plants,' Babacan said.
(Reporting by Alexandra Hudson) Keywords: TURKEY ECONOMY (alexandra.hudson@reuters.com; +90 212 350 7062; Reuters Messaging: alexandra.hudson.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2011. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.