ECONOMY

Turkey wants higher credit rating

ANKARA (Reuters)- Turkey deserves a higher credit rating and rating agencies should take into account a huge upward revision of gross domestic product and its lower debt ratios, Economy Minister Mehmet Simsek said yesterday. Last weekend Turkey revised its 2006 GDP upward by 31.6 percent to 758.4 billion lira ($621 billion) after a comprehensive study of the national accounts system. The revisions resulted in the reduction of a number of important ratios between GDP and public sector debt, the budget and current account deficits and some analysts have said the changes could support Turkey’s credit rating outlook. Simsek also defended the government’s economic performance in a specially convened news conference amid mounting criticism from businessmen that the center-right, pro-business Justice and Development Party (AKP) does not place the necessary emphasis on reforms despite a worsening global economic climate. Moody’s Vice President Kristin Lindow said last week the revisions were not key to the country’s rating perspective. «From a rating perspective, we look more at capacity to pay indicators, debt or interest payments to revenues and also external debt to current account receipts and current account balance to exports,» she told Reuters. Business groups have criticized the government for slow progress on measures to stimulate a slowing economy and pushing reforms such as a long-delayed, International Monetary Fund-sought social security reform through parliament. Simsek, who was flanked by the finance minister and the minister for economic coordination at the news conference, said Turkey was «in a position to be least affected» by external shocks, and the level of government debt stock was no longer a source of concern. Finance Minister Kemal Unakitan repeated a pledge that the government would press ahead with structural reforms, privatization and maintain fiscal discipline. Critics say the government has been distracted by an offensive against Kurdistan Workers’ Party (PKK) rebels in northern Iraq and amending the constitution to allow female students to wear the Islamic headscarf at universities. They also say Turkey was relying too heavily on foreign investment to finance its gaping current account deficit. Simsek said the resilience of Turkey’s public sector debt stock to economic shocks had increased as a result of the large upward revision of its national income. But analysts said Turkey needs to do more to receive a rating upgrade. «We think that government officials should focus more on structural reforms in the short term in order to convince rating agencies to make an upgrade after the GDP revision,» said Raymond James Securities’ chief economist Ozgur Altug. Turkish inflation will follow a trend consistent with its medium-term target of 4 percent, Simsek said after the country failed to reach inflation goals for two successive years. Turkey’s central bank has come under renewed pressure for failing to trim rising inflation, largely due to high food and energy prices. Simsek said he hoped the AKP-controlled parliament would very soon approve a long-awaited social security reform. «We hope parliament will approve it in the next one to two weeks,» Simsek said. Parliamentary approval of the reform, which will raise the retirement age, is a precondition for the IMF to release a $1.3 billion loan tranche. Simsek said the IMF would «probably» carry out only one review before the completion of its $10 billion standby deal with Turkey in May, though he added there was no final decision on this yet.