Washington: The International Monetary Fund (IMF) has warned Turkey of lower medium-term growth and prospect of “middle income trap” if it does not reform its savings rate and competitiveness.
Turkey’s economy, under current policies, should grow only 3.5 percent over the next five years, limiting its ability to catch up with richer developed countries, the IMF said in its yearly assessment of Turkey’s economy.
The IMF also repeated calls for Turkey to keep its monetary and fiscal policies tight to limit inflation and boost domestic savings, taking advantage of continued capital flows to emerging markets.
“The current international environment provides a potentially brief window of opportunity for such adjustment, which should therefore not be delayed,” IMF said.
Falling oil prices have taken some pressure off Turkey’s high inflation and current account deficit, but structural problems remain and analysts have voiced concern about political meddling in the economy ahead of a parliamentary election next June. After raising interest rates sharply in January to halt a slide in the lira, the central bank cut rates in May, June, July and August, hurting its credibility, according to the IMF. QNA
