Turkey's economic outlook sanguine?

By Batuk Gathani

BRUSSELS, DEC. 16. The consensus in major European financial capitals is that Turkey's programme of major economic reforms makes it a worthy recipient of an IMF assistant package.

Turkey's latest acquisition of a $ 7,500-million loan has surprised the markets, as it is nearly double the market expectations. The loan is primarily aimed at restoring investors' confidence and rescuing vital economic reforms. Though often rated as ``Europe's odd man out'' in ethnic, religious, political and economic terms, Europeans do not underestimate its strategic and logistic importance. It is a bridge between Europe and Asia or secular and fundamentalist Islam.

Turkey is now at a watershed in its political and economic relations with the European Union. The challenges posed by Islamic fundamentalists have so far been contained more by `Kamalist' secular military than by civilian politicians.

Turkey has been long suffering from economic crises. The economic `promised land' is not yet in sight for a vast majority of the Turks. The reform process, initiated over a decade ago, seems to have lost momentum in the morass of endemic corruption and inefficiency.

Though the IMF has made a `leap of faith' in Turkey's economic future, analysts conclude that all the IMF has done is to buy Turkey more time, before its Government makes yet another bold attempt to restore financial and economic health.

Apart from the effects of conventional risk aversion and rising oil prices, the crisis is rated as ``home-made - starting with the woefully regulated banking system''. The government's controversial if not unwise decision to pump liquidity in sick banks in a disastrous attempt to bail them out, has been mainly attributed to the woes.

The perception in markets is that Turkey will pay a high price for the recent two weeks' financial turmoil. It is argued that economic growth will come to a halt with higher interest rates and new taxes.

Despite some reservations about the coalition government's ability to sustain the process of bold economic reforms, many Europeans also feel that Turkey may be steaming towards calmer economic and political waters. Turkey is also fast mending its diplomatic fences with Greece - it's arch rival in the region.

The Turkish Prime Minister, Mr. Bulent Ecevit, is a well-admired figure in the European political forums and respected for his moderation and secularist approach to ethnic and religious problems.

Turkey is a market of 65 million people with huge growth potential. The authorities have given correct and appropriate signals for investment from abroad but foreign investors have yet to be convinced about government's ability to implement a bold reform programme, plus eradicate corruption and inefficiency.

Apart from the IMF loan, the Government hopes to raise $7600 millions through privatisation. Recent research also reveals that Turks have little confidence in banks and the population holds a large amount of gold. The Government's dilemma is how to channel such valuable resources into the national economy?

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Section  : International
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