’Clairvoyant’ calls for new IMF deal
Güncelleme Tarihi:
by Ayşegül Akyarligüven - Hurriyet
Oluşturulma Tarihi: Ocak 20, 2009 00:00
ISTANBUL - Speaking in Istanbul, economy professor Nouriel Roubini says Turkey should agree upon a deal with the International Monetary Fund to overcome the destructive effects of the global crisis. Roubini is known as predicting the global crisis as early as September 2006.
Turkey should finalize an agreement with the International Monetary Fund, or IMF, to restore investor confidence and overcome a recession, according to Nouriel Roubini, the New York University Professor who predicted last year’s meltdown as early as Sept. 7, 2006.
Speaking to customers of Yapı Kredi Private Banking in Istanbul over the weekend, Roubini said Turkey has received its share in the global crisis, despite its resistance to shocks. In the aftermath of the 2000 to 2001 crisis, Turkey had great success with the IMF, the Istanbul-born economist said. "The current crisis has created a shock everywhere, having an effect that exceeded all predictions," he said. "Although it is resistant to shocks, Turkey has received its share from the crisis. Now it needs an IMF program. An agreement that also delivers monetary aid would help solve both the liquidity crunch and the confidence problem."
Some of the developing economies will be relatively less hit by the crisis, due to the precautions they are taking, Roubini noted. "In fact, fiscal policies and rules in many developing economies are much better than those in the United States and Western Europe. But those that receive IMF support and structure their policies accordingly will be less hit by the crisis. Turkey’s financial system was strengthened with IMF support after the 2001 crisis. Thus, Turkey should agree with the IMF in the current crisis, too. Then, it should look at its current account deficit problem."
The period when the Turkish Lira was overvalued against foreign currencies helped increase the deficit, Roubini said. "Now, the lira is not as strong as it was before, but Turkey’s potential to record extra growth is also limited. Still, one should be careful not to let the lira fall too suddenly. Such a shock drop would affect both inflation and foreign debt negatively. The fall in commodity prices is positive for Turkey, as it is a net energy importer. The key issue here is determining the financial principles."
Despite the fact that Turkish banks are strong, the government should act to provide liquidity if necessary, he added. Responding to a question on whether the global crisis has "barely touched" Turkey, Roubini said Turkey has been affected by the crisis, as many other countries also have.
First signals
The crisis will not end before 2010, he said, outlining signals that the crisis is over as follows: The first signals will come from the financial markets. Share prices will embark on an upward trend. Companies that have good credit records will be able to use cheaper credit. Job losses will subdue. The global economy will start growing in 2010, but growth of companies will be less than expected. Stimulus packages will work, but will not deliver positive results immediately.
Roubini said inflation in Turkey will fall further, thus the Central Bank will have more room for interest rate cuts. The economy will enter a recession starting from the fourth quarter this year, he predicted, adding that the recessions in the United States and Western Europe will affect Turkey negatively, as exports will fall. The renowned economist also praised the Central Bank’s policy on interest rates.
Roubini is often referred to as "Dr. Doom" for his cautious stance on the global economy, sometimes perceived as overly pessimistic.
Speaking to customers of Yapı Kredi Private Banking in Istanbul over the weekend, Roubini said Turkey has received its share in the global crisis, despite its resistance to shocks. In the aftermath of the 2000 to 2001 crisis, Turkey had great success with the IMF, the Istanbul-born economist said. "The current crisis has created a shock everywhere, having an effect that exceeded all predictions," he said. "Although it is resistant to shocks, Turkey has received its share from the crisis. Now it needs an IMF program. An agreement that also delivers monetary aid would help solve both the liquidity crunch and the confidence problem."
Some of the developing economies will be relatively less hit by the crisis, due to the precautions they are taking, Roubini noted. "In fact, fiscal policies and rules in many developing economies are much better than those in the United States and Western Europe. But those that receive IMF support and structure their policies accordingly will be less hit by the crisis. Turkey’s financial system was strengthened with IMF support after the 2001 crisis. Thus, Turkey should agree with the IMF in the current crisis, too. Then, it should look at its current account deficit problem."
The period when the Turkish Lira was overvalued against foreign currencies helped increase the deficit, Roubini said. "Now, the lira is not as strong as it was before, but Turkey’s potential to record extra growth is also limited. Still, one should be careful not to let the lira fall too suddenly. Such a shock drop would affect both inflation and foreign debt negatively. The fall in commodity prices is positive for Turkey, as it is a net energy importer. The key issue here is determining the financial principles."
Despite the fact that Turkish banks are strong, the government should act to provide liquidity if necessary, he added. Responding to a question on whether the global crisis has "barely touched" Turkey, Roubini said Turkey has been affected by the crisis, as many other countries also have.
First signals
The crisis will not end before 2010, he said, outlining signals that the crisis is over as follows: The first signals will come from the financial markets. Share prices will embark on an upward trend. Companies that have good credit records will be able to use cheaper credit. Job losses will subdue. The global economy will start growing in 2010, but growth of companies will be less than expected. Stimulus packages will work, but will not deliver positive results immediately.
Roubini said inflation in Turkey will fall further, thus the Central Bank will have more room for interest rate cuts. The economy will enter a recession starting from the fourth quarter this year, he predicted, adding that the recessions in the United States and Western Europe will affect Turkey negatively, as exports will fall. The renowned economist also praised the Central Bank’s policy on interest rates.
Roubini is often referred to as "Dr. Doom" for his cautious stance on the global economy, sometimes perceived as overly pessimistic.