Managing public debt crucial in hard times
Güncelleme Tarihi:
Hurriyet Daily News
Oluşturulma Tarihi: Aralık 22, 2008 00:00
ISTANBUL - Turkey’s growing public debt was largely financed by inflows of foreign capital, but as the crisis bites, the rules have changed, according to an economist. Meanwhile, a top bureaucrat warns that public support should be secured for stimulus packages
As Turkey’s economy slows down and is expected to contract in the fourth quarter of the year, an economist drew attention to "historical structural defects," noting they are putting the whole economy in danger as the global turmoil deepens.
"The history of Turkey's economy is actually a history of crises," Nurhan Yentürk, an economist at Bilgi University, said at a conference in Istanbul on Saturday. "It is a process of moving from one crisis to another."
Debts can push the country to greater danger amid the global crisis, Yentürk said. "The high amount of the external debt of Turkey's private sector increases the crisis threat on the country's economy," she said. "Following the crisis, public sector debt also has increased considerably."
Worrisome figures
Turkey’s public debt stood at 38.8 percent of gross domestic product in 2007, much smaller than the European Union average of 60.2 percent in 2006. But the ratio of public debt to credits stands at more than 102 percent, while its ratio to deposits is nearing 83 percent, way above EU averages. As of the end of March, the public debt stock stood at YTL 353 billion, or $230 billion.
"Public debt could be managed through receiving external sources, and that was what happened with rising foreign direct investment in the past four or five years. But the rules have changed," Yentürk said.
What lies at the core of capitalism is the maximization of profit, she said. "As a result, excessive consumption is pumped and that is at the very root of the current global financial crisis," Yentürk said. "Both in Turkey and in the world, people are directed to consume in order to keep the domestic market alive, instead of investing in production."
Speaking at a conference Friday, Ahmet Ertürk, chairman of the Savings Deposit Insurance Fund, or TMSF, said public spending is "the key" to ending the crisis.
"[Global] bailout packages are dependent on public support and public spending," said Ertürk. "But officials should not make innocent people bear the burden of economic deficiencies, mistakes and faults.
"The absence of public support would hurt the financial system badly. Thus, receiving public support in designing retrieval methods and processes has a crucial importance."
Turkey has "learned its lesson" during the 2000-2001 economic crisis, Ertürk said. "That crisis was a massive public cost. The work we have done in the last five years was oriented to recover this cost.
"There is a need for international consensus. Amid such a crisis, the biggest danger would be the lack of a global authority," he said.
Speaking at the Friday conference, İsmail Erdemir, vice chairman of the Banking Regulation and Supervision Agency, or BDDK, said it is impossible for Turkey "to escape from the effects of the global economic crisis."
"The banking sector has started to feel the breath of the crisis on its back, but the sector was well prepared," Erdemir said. "As BDDK, we have adopted a more cautious approach in regulation and supervision since last year, when the crisis began to deepen."
There is no need to be "pessimistic" about Turkey's banking system, he said, recalling that banks continued with healthy growth in the third quarter.
"The effects of the crisis on Turkey's banking sector are limited," he said. "The sector is strong enough to overcome the difficulties that may emerge in the upcoming period."
"The history of Turkey's economy is actually a history of crises," Nurhan Yentürk, an economist at Bilgi University, said at a conference in Istanbul on Saturday. "It is a process of moving from one crisis to another."
Debts can push the country to greater danger amid the global crisis, Yentürk said. "The high amount of the external debt of Turkey's private sector increases the crisis threat on the country's economy," she said. "Following the crisis, public sector debt also has increased considerably."
Worrisome figures
Turkey’s public debt stood at 38.8 percent of gross domestic product in 2007, much smaller than the European Union average of 60.2 percent in 2006. But the ratio of public debt to credits stands at more than 102 percent, while its ratio to deposits is nearing 83 percent, way above EU averages. As of the end of March, the public debt stock stood at YTL 353 billion, or $230 billion.
"Public debt could be managed through receiving external sources, and that was what happened with rising foreign direct investment in the past four or five years. But the rules have changed," Yentürk said.
What lies at the core of capitalism is the maximization of profit, she said. "As a result, excessive consumption is pumped and that is at the very root of the current global financial crisis," Yentürk said. "Both in Turkey and in the world, people are directed to consume in order to keep the domestic market alive, instead of investing in production."
Speaking at a conference Friday, Ahmet Ertürk, chairman of the Savings Deposit Insurance Fund, or TMSF, said public spending is "the key" to ending the crisis.
"[Global] bailout packages are dependent on public support and public spending," said Ertürk. "But officials should not make innocent people bear the burden of economic deficiencies, mistakes and faults.
"The absence of public support would hurt the financial system badly. Thus, receiving public support in designing retrieval methods and processes has a crucial importance."
Turkey has "learned its lesson" during the 2000-2001 economic crisis, Ertürk said. "That crisis was a massive public cost. The work we have done in the last five years was oriented to recover this cost.
"There is a need for international consensus. Amid such a crisis, the biggest danger would be the lack of a global authority," he said.
Speaking at the Friday conference, İsmail Erdemir, vice chairman of the Banking Regulation and Supervision Agency, or BDDK, said it is impossible for Turkey "to escape from the effects of the global economic crisis."
"The banking sector has started to feel the breath of the crisis on its back, but the sector was well prepared," Erdemir said. "As BDDK, we have adopted a more cautious approach in regulation and supervision since last year, when the crisis began to deepen."
There is no need to be "pessimistic" about Turkey's banking system, he said, recalling that banks continued with healthy growth in the third quarter.
"The effects of the crisis on Turkey's banking sector are limited," he said. "The sector is strong enough to overcome the difficulties that may emerge in the upcoming period."