Turkey economy minister sees sub-trend growth

Turkish financial markets have been buffeted by the credit crisis that has brought the U.S. banking industry to its knees and impacted virtually every market globally, Reuters q

However, Simsek said the impact of the financial crisis on the economy had been diminished by a combination of economic reforms and fiscal discipline. But it will not escape unscathed.

"Quite clearly for this year, like last year and possibly next year we may have somewhat sub-trend growth. It is not the end of the world," he said.

He defined trend economic growth as being around 6 percent over the medium to long-term.
In the first half of 2008, the economy grew 4.2 percent, he said. In the second half of the year, he believes growth will be around 4 percent.

"We don't live on an island. We are not immune to what is happening globally," he said.

Domestic factors such as poor agricultural conditions and a political crisis that has since subsided also took a toll on economic growth. Some negative effects are expected to linger in third-quarter gross domestic product data.

Turkey's economy grew 4.5 percent last year after averaging 7.4 percent a year from 2002 to 2006.

He said that even as the financial markets have been under stress, the expectation for foreign borrowing in 2009 is likely to be similar to previous years.

Turkey, which completed a $1.5 billion offering this month, expected to borrow $5.5 billion this year. It has roughly $1.5 billion left to borrow for the year, but strained market conditions could limit its operations.

"Some years you do a bit more than what you plan and you do some prefinancing for the following year. Some years you just don't get to do all of it," he said.

Asked if the financial crisis would limit Turkey's international fund raising plans, Simsek said: "Market conditions allowing, probably we'll
execute our plans. But doing or not doing is not make or break for us."

Earlier on Wednesday, the European Bank for Reconstruction and Development said it plans to invest 150 million euros ($220 million) in Turkey in 2009 and 300 million euros in 2010.

In order to get the investment, Turkey would need to change its status within the EBRD. Now it wants a role as a country of operation, a status that is expected to get final bank approval by the end of October.

"We are a growing nation with huge financing needs and we want to diversify as much as possible financing sources," Simsek said.

EMERGING MARKET?

With the world focused on Washington to see when a $700 billion financial rescue package becomes law, Simsek said Turkey's economy is showing "a lot of resilience."

It went through its own banking and financial crisis in 2001, but with help from the International Monetary Fund it has since reformed these sectors of the economy.

Asked if the United States was behaving like an emerging market, Simsek said: "I guess in some ways it is."

"We went through this banking sector adjustment that the United States is going through now.... I think it is the first time since the beginning of the subprime crisis that the U.S. has begun proactively managing the situation," he said.

"When you are faced with a significant systemic risk, a significant stress and value destruction across the board, ultimately there is no easy way out. Taxpayers suffer."