Turkey Must Tighten Fiscal And Monetary Policy, Says IMF

October 6th, 2013 by James

The International Monetary Fund has urged Turkey to tighten its fiscal and monetary policies for reducing its external imbalances that have been exacerbated by capital outflows from emerging markets.

Turkey Must Tighten Fiscal And Monetary Policy, Says IMF

“The market reappraisal of advanced economies’ monetary policies has exposed Turkey’s main vulnerability — its external imbalance,” the IMF said after a mission visit to Turkey.

“In this context and with gross external financing needs projected to remain high over the next few years, a weakening or a reversal of capital flows present a major challenge for the Turkish economy,” the Fund said in a statement.

The current account deficit of Turkey should widen to 7 percent of its GDP this year, as per IMF. It should stay that way in 2014, in part due to more gold imports, the IMF added.

Lira’s fall had worsened the outlook for inflation, Turkey’s central bank governor, Erdem Basci, said last week. He added the central bank would be implementing additional monetary tightening in its complex money market operations if there were risks of price growth getting out of control. The lira was unjustifiably weak, and said inflation would be higher than the previous forecast of the bank, Basci said.

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