Turkey’s Economy May Shrink Six Percent, Says World Bank

ANKARA (Hurriyet)–The World Bank expects Turkey’s economy to shrink between 2 and 6 percent in 2009 as the global crisis hammers the nation’s industrial output and exports, the World Bank country director in Turkey said Wednesday.

Ulrich Zachau told Reuters he expected the unemployment rate would continue climbing, beyond the record high of 15.5 percent, as large numbers of young people enter the labor force.

Zachau said he saw economic growth in Turkey this year at “somewhere between minus two and minus six”, having earlier predicted the country would post flat growth or shrink slightly in 2009. This week Turkey’s government lowered this year’s economic growth target to minus 3.6 percent from a previous plus 4 percent, and boosted the budget deficit projection to 48 billion Turkish Liras from 10.4 billion liras. The government revision heralded more realistic economic policies in line with the sharply changed economic outlook both in Turkey and the world, said Zachau.

“Updating the numbers is a clear expression of intent by the government to bring economic policy, the budget, everything in line with the economic situation in the world and in Turkey. That is a good thing,” he said. Turkish economy’s high degree of integration with the world economy was a reason why it was shrinking significantly now, he added. Turkey’s economy shrank 6.2 percent in the last quarter of 2008, piling pressure on the government to agree to a loan deal with the International Monetary Fund.
This high degree of integration will benefit Turkey when the world economy starts consolidating and growing again, he said.

Concerning the economic growth outlook in 2010 and beyond, Zachau said: “Nobody knows.

I have no reason not to believe the economy will begin growing in 2010, but I also have no reason to believe it will begin growing in 2009, 2010 and 2011.”

The government expects Turkey’s economy to grow 3.3 and 4.5 percent in 2010 and 2011 respectively.

Zachau predicted that Turkey’s unemployment rate would continue to rise above a record high of 15.5 percent at the start of 2009 because large numbers of young people are entering the labor force, adding to the existing pool of jobless.

Official data showed Wednesday that the number of jobless surged to a worse-than-expected 3.650 million between December and February, measured on a three-month moving average, from 2.591 million in the same period a year earlier.

The government target of a 13.5 percent unemployment rate would not be met in 2009, he said. “I do think that a rate below the current rate is going to be very hard to achieve by the end of the year,” he added.

Zachau also urged the Turkish government to keep taking stimulus measures such as tax reduction, special credit schemes and improving liquidity to help contain the downturn in the economy. “Without those measures the situation would be even worse.

It is important to keep these policies focused, and to keep doing what has been done,” he said.

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