Turkey is sticking to a forecast of more than 4% growth this year – far above what is seen as attainable by investors and the IMF – betting that a loan guarantee programme will help the economy, an adviser to President Tayyip Erdogan said.
In an interview with Reuters late on Wednesday, Erdogan’s chief economic adviser, Cemil Ertem said the International Monetary Fund (IMF) had made a “big mistake” in giving a downbeat growth forecast for Turkey this year.
In its World Economic Outlook released this week, the IMF cut its 2017 forecast for Turkey’s growth to 2.5%, down from 2.9% previously, citing heightened political uncertainty, security concerns and the impact of the weakening lira on foreign-currency-denominated debt.
“The IMF lowered its Turkey growth (forecast) for 2017. I think this is a very big mistake,” said Ertem, who plays an influential role in formulating economic policy.
He said it failed to recognise the contribution of Turkey’s KGF credit guarantee fund, by which the government guarantees loans to boost the real sector.
The fund could guarantee as much as 200bn lira ($55bn) of loans this year, he said.
“The contribution of the KGF alone to growth in 2017 will be 1-1.5 points. This shows that for 2017 growth will be in a band of 4%-4.5%. The IMF is not taking this into account,” he said.
A total of 137.3bn lira ($38bn) of loans have been extended under the credit guarantee fund so far, he said.
The government has been seeking ways to support manufacturers and other companies in the real economy, given their levels of dollar-denominated debt.
Ankara has been adamant that growth, and foreign investment, would accelerate in the aftermath of Sunday’s referendum to change the constitution and give Erdogan sweeping new powers.
Turks voted by a thin margin to back the changes, although the opposition has said it will fight the referendum in court, citing what is says were widespread irregularities.
The government has said the changes will make it easier to push through investor-friendly reforms to labour and tax laws, boosting growth.
But investors are concerned about Erdogan’s further consolidation of power and his grip on monetary policy.
A Reuters poll of 50 economists on Wednesday put 2017 growth at 2.6%, just above the IMF’s forecast.
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