ECONOMY

Babacan sees growth slowing but still above 5 pct in 2007

LONDON (Reuters) – Turkey’s economic growth is likely to slow in 2007 but hold above 5 percent, Turkish Economy Minister Ali Babacan said yesterday in a speech to investors. «The growth of the Turkish economy came from private sector activity. It was mainly private sector investments driving the growth. The average growth rate for the last four years is 7.8 percent and for this year, the first half is 7.5 percent,» Babacan said. The official growth target for 2006 and 2007 is 5 percent under a $10 billion loan deal with the International Monetary Fund. «Next year we are expecting the growth to ease to a certain extent, but again the growth expectation for next year is nothing below 5 percent,» he added. Foreign direct investment has played a big part in boosting Turkey’s economy. On Tuesday, US banking giant Citigroup said it would pay $3.1 billion for a 20 percent stake in Turkey’s Akbank. Babacan said the government is close to selling a large stake in the second-largest state bank, Halkbank. Turkey presented its 2007 budget plan on Tuesday that included a generous spending plan of 204.9 billion lira (110 billion euros) for 2007, down slightly from an earlier target of 207 billion lira but still well above an estimated 174 billion lira in 2006. Economic sources say the International Monetary Fund, which has a team in Turkey this week for talks with the country, was unhappy with the earlier draft and had urged Ankara to trim spending or raise revenues. Babacan highlighted that the government will continue to generate high public sector primary surpluses while sticking with tight fiscal policies. «We targeted a primary surplus of 6.5 percent for four years in a row. It is very likely we are going to close this year with a primary surplus figure of around 7 percent,» Babacan said. The high primary surpluses, which excludes interest payments on debt, have helped Turkey to cut its debt stock and lower interest rates over the last four years. Debt stock has fallen from 91 percent in 2001, Babacan said. He predicts it will be around 50 percent by the end of 2006. «The European Union process of Turkey is vitally linked with our economic progress… the vision of being a member of the EU, one day, brings predictability to our business environment,» he said. Babacan said that if not for the political process, Turkey on a technical basis would meet the criteria for membership in three to four years. But relations with France, a founding member of the EU, turned chilly recently after the French lower house of parliament overwhelmingly approved a bill making it a crime to deny Armenians suffered genocide at the hands of the Ottoman Turks during World War I. Turkey, calling this a severe blow to its relations with France, denies the accusations. «The climate in the EU is not very good. We have to be aware of it,» Babacan said although not making a direct reference to the French vote. «Sometimes in countries where things are not going well it is easier for politicians to blame externalities for what is going wrong in that country,» he said.