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Minister Babacan: IMF thinks positively about fiscal rule
The delegation was quite positive about the fiscal rule, as it had been during its preparation process, the minister said.
The fiscal rule draft law, prepared with contributions from academics and financial institutions, is expected to ease economic pressure on the public sector, provide the private sector with a greater number of resources and give a more established and predictable structure to the economy. After being given its final shape during last week’s Economy Coordination Board (EKK) meeting, the bill is now ready to be presented to the Prime Ministry and then to Parliament.
Babacan has recently stated that the fiscal rule bill would become law before Parliament went on its summer recess. The meeting with the IMF delegation was primarily on the banking sector and overall macroeconomic developments, the minister noted, adding that the possible negativities that the aftereffects of the global crisis may have on the Turkish economy were also discussed.
The IMF delegation also discussed with the economy minister such issues as the growth rate, inflation, employment and budget developments and held consultations on fiscal and monetary policies.
Babacan talked further about budget targets, saying that the figures in the 2010 budget had been cautiously prepared by taking every negative possibility into account. The general conditions of the budget and the annual targets will work without major problems albeit some minor deviations in the realization of monthly targets, the minister asserted, giving assurances that the targets seem attainable.
Inflation and CAD signs of reinvigoration
Minister Babacan provided an unconventional explanation for the recent increases in the inflation rate and current account deficit (CAD), saying these two are indeed indications that things are turning around. He underlined that many economies around the world are still seeing signs of deflation whereas the Turkish economy is rallying rapidly. “Even so, we will be closely monitoring any change in these indicators,” he noted.
Later in the day, Babacan attended a meeting organized by ECOFIN between economy and finance ministers from both EU-member and candidate countries in Brussels. Ministers from EU-member countries congratulated Babacan on the recent progress made in the Turkish economy and asked him about recent developments.
In its report released on May 5, the European Council predicted that Turkey would be the fastest growing country in the European continent with a growth rate of 4.7 percent this year and 4.5 percent in 2011. The European Commission said in its report that Turkey’s growth rate could increase to 5 percent since all the indicators pointed to stable growth this year.
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