ECONOMY

Turkey says growth stronger than expected; GNP target up to 4 pct

ANKARA – Turkey has raised its target for gross national product (GNP) growth for 2002 to 4 percent from 3 percent in recent talks with visiting IMF officials, Turkish economic officials said yesterday. Turkish officials have long hinted that 2002 growth could be stronger than originally targeted under their $16 billion loan accord with the International Monetary Fund. Fund representatives were wrapping up an inspection tour of Turkey and officials said yesterday the IMF team would hold a news conference before departing today. The team had been expected to depart yesterday. Its report will be presented to the IMF in Washington as it considers paying a $1.6 billion slice of Turkey’s loan. The Turkish officials told Reuters that the GNP growth target for 2003 remained at 5 percent. GNP fell by 9.4 percent in 2001 as the impact of banking sector crisis and collapse fed through into Turkey’s economy. The $16 billion loan deal is designed to reform Turkey’s economy, pull it out of recession and help the treasury deal with a huge debt burden, much of it assumed from failed private banks and costly state banks. Turkey is on course to meet another of its central IMF targets for this year: reducing consumer inflation (CPI) to 35 percent. Officials said a 20 percent target for end-2003 CPI inflation was unchanged. They said Turkey was aiming for exports of around $38 billion and imports of $51 billion in 2003. Foreign trade officials have predicted more than $34 billion in exports this year and $44 billion in imports. High interest rates Turkey has also promised to keep a lid on the cost at which it borrows at home to maintain its debt load, but political and regional turmoil have pumped borrowing rates higher in the second half of this year. The treasury has been borrowing at above 70 percent in recent months, despite promising the IMF that the average borrowing rate would be below 70 percent. Much of the rise reflects the premium markets have put on the uncertainty surrounding the result of Turkish general elections on November 3. Turkish markets are plagued by worries over what kind of government will emerge from the elections and over the impact of a possible conflict in neighboring Iraq on the economy and the IMF loan pact. Stocks closed yesterday down 2.98 percent at 9,029.59 points. The lira closed at 1,651,000 to the dollar from Friday’s 1,636,000 and yields on the busiest July 2, 2003 debt rose to 70.92 percent from Friday’s 70.56 percent. Officials said their budget calculations were based on a pledge to the IMF to produce a primary budget surplus, excluding debt payments, of 6.5 percent of GNP. The leading candidate in pre-election polls, the conservative Justice and Development Party, has said that it would negotiate with the IMF to lower that primary surplus target to allow more spending to address social problems caused by the economic crisis.