Fri, 30 Oct 2020

ISTANBUL, Sept. 29 (Xinhua) -- Turkey unveiled on Tuesday a new economic program for the next three years, fixing macro indicator targets as the national currency continued to weaken despite the central bank's efforts.

The New Economic Program (NEP) announced by Treasury and Finance Minister Berat Albayrak in Istanbul, the financial hub of the country, features targets for basic macro indicators such as inflation, employment, growth, and current account balance for the 2021-2023 period.

Albayrak said during the presentation that his country is enjoying a rapid rebound from the COVID-19 pandemic and will manage a positive GDP growth of 0.3 percent this year and an important rebound in 2021.

He indicated the economy could contract by 1.5 percent this year in the worst-case scenario while the International Monetary Fund (IMF) is forecasting up to 5 percent contraction.

"The Turkish economy has entered a rapid recovery process as of July," Albayrak said, stressing that the country distinguished itself positively from other developing countries.

According to the minister, the growth rate expectations stand at 5.8 percent in 2021 and 5 percent in 2022 and 2023.

Inflation, on the other hand, is expected to stand at 10.5 percent at the end of 2020, and 8 percent in 2021. Currently, consumer prices stand at 11.7 percent, according to official data.

The country also expects the budget deficit ratio to GDP to decline gradually throughout 2021-2023, the minister noted.

As regards to the unemployment rate, the program expects it to reach 13.8 percent this year and 12.9 percent next year. The jobless rate currently stands at 13.4 percent.

Meanwhile, the Turkish lira skidded to new record lows against the U.S. dollar on Tuesday trading in the morning at 7.85 Turkish liras, a more than 2 percent loss in a week.

Last week, the central bank lifted its benchmark interest rate by 2 percentage points in an unexpected move to boost the lira, which has lost over 22 percent of its value since the start of the year.

The bank announced Thursday that it would raise its one-week repo rate from 8.25 percent to 10.25 percent. The lira rose more than 1 percent against the dollar, though it later reversed those gains and continued to falter to new record lows.

Turkey's large current account deficit, an exodus of foreign capital, and mistrust of the lira among Turkish savers who are buying dollars have put heavy pressure on the currency in recent months.

Just like around the world, the pandemic brought the Turkish economy to a near standstill in the second quarter as the country in March shut schools and businesses, closed borders, and adopted weekend stay-home. The economy was mostly reopened in June.

Turkish economy shrank by 9.9 percent in the second quarter in the wake of the pandemic after growing 4.4 percent in the previous three months.

Albayrak also said all leading indicators showed that the worst had passed, and "the recovery in the economy is uninterruptedly gaining pace in the third quarter."

Enver Erkan, an economist at Istanbul-based Tera Securities, commented that the government's new program seemed to be based on "realistic foundations."

"Basing the forecasts on rational foundations, creating alternative scenarios for uncertainties, emphasis on structural transformation in the broader period are prominent details in terms of the NEP," he said in a note to investors.

This expert cautioned, however, on the depreciation of the Turkish currency, warning that it causes an increase in import costs, a contraction in demand and production, and also an increase in inflation and prices.

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