Turkey hopes to master inflation

Turkey expects inflation of 20.0% in 2003 but hopes to reduce it to 12.0% in 2004 and 8.0% in 2005, Babacan said.
"In the last 30 years we have experienced high inflation," Babacar explained, noting the "negative correlation between growth and inflation" in Turkey over that period.
He noted the wide gap between gross domestic product (GDP) per capita in the EU and Turkey and said it was necessary to boost "the flexibility of the economy" to narrow it.

Babacan, a founding member of the Justice and Development Party which scored a landslide election victory in November 2002, said he was optimistic about creating sustained growth in Turkey.

The country plunged into financial crisis in 1999 and slid back into recession in 2001.

Babacan said the government aimed to achieve GDP growth of 5.0 percent this year, pointing out that economic growth had recovered to 6.2% in 2002, after the steep 2001 recession when the economy contracted by 9.2%.

Ankara was counting on a dynamic export sector, which enjoyed "record growth" in 2002, to drive economic growth despite a slowing world economy, the minister said.

"On exports, the trend will continue although world economic growth could slow," he said.

Babacan said the new government’s economic programme would continue to centre on reforms agreed with the International Monetary Fund.
The IMF gave a credit line of 16 billion dollars to the previous administration in Ankara and imposed a strict restructuring programme designed to lift the economy out of its financial crisis. "Our economic programme is quite extensive and the IMF programme is part of it," he explained.
"On some points we will do more than the IMF conditions, for example our programme plans to privatise a hundred companies this year."
Ankara would nevertheless introduce some measures to soften the impact of the IMF-required reforms on the Turkish population.
"(There will be) more emphasis on the social issues," he said. Babacan said the new government, which has its roots in an Islamic movement, was negotiating with the IMF to fine-tune the reforms it had demanded. "We’re going to continue the main programme and we’re going to do minor adjustment within the stand-by agreement with the IMF,"he said. "We are negotiating the final terms of a letter of intent," he said. "The draft is almost complete."