Turkish Finance Minister Mehmet Simsek has said that Turkey was vulnerable to external shocks because of its high current account deficit.
In an interview with the Financial Times, Simsek said, "yes, we have a very large current account deficit and we are concerned about it and I do take on board that a large current account deficit makes us more vulnerable to external shocks. But at the same time other fundamentals in Turkey are strong enough to manage things."
The daily wrote that according to the figures published last week, the Turkish economy grew by 10.2 percent in the first half of the year, with a current account deficit of more than 9 percent of gross domestic product, as consumers continued to splash out on imported goods and services.
"It is true that domestic demand has been very strong and possibly unsustainably so," he said.
He maintained that forward-looking figures, such as industrial production and car sales, indicated the economy was cooling down rapidly enough to avoid a hard landing next year.
Simsek also predicted that the rolling 12-month current account deficit would peak in the next couple of months and then start coming down towards the end of the year.
"Wherever you look, data are suggesting that the pace of growth, the pace of domestic demand, is moderating. The country's purchasing managers' index, an indicator of sentiment in the manufacturing sector, had dipped below the bellwether 50 per cent mark in August, the first time since 2009," he said.
Simsek argued that Turkey's longer term prospects would continue to attract investors, but admitted it was a problem that only about $10bn-$12bn of the roughly $75bn annual current account deficit was financed by foreign direct investment.
He stressed that the high current account deficit was due not just to buoyant Turkish domestic demand, but also to factors such as the slowdown in the EU, which accounts for about half of the country's trade, economic and political upheaval in north Africa and the Middle East, and high energy prices.
"The deficit remained a 'structural problem', without a quick fix. Turkey is planning to improve its record in education, infrastructure, research and development, the informal economy and labour flexibility so as to make higher growth sustainable over the longer term," Simsek added.
AALast Mod: 19 Eylül 2011, 16:19