Turkey needs reforms to overcome risks to growth: OECD

The OECD has urged the government to introduce necessary reforms to keep the growth robust amid domestic demand and foreign funding dependence With low domestic savings and volatile external competitiveness, Turkish growth is highly dependent on domestic demand and foreign finance, the Organization for Economic Cooperation and Development (OECD) has said in a new report that urges the government to introduce urgent fiscal policies.

“External demand is strengthening, in particular in a context of recovery in the European Union, but high inflation and exchange rate volatility and low productivity growth endure,” the OECD’s Economic Survey on Turkey said, continuing to stress “competitiveness remains fragile and dependence on foreign savings is very high.”

The organization praises the “broad-based and inclusive growth” that continued through and after the global crisis, but warns against the risks stemming from it being too centered on domestic consumption, “which is too much funded by foreign saving.”

The OECD argues the mounted current account deficit, the main pressure on the country’s economy, has been also mounted on this aspect, leading economy managers to introduce measures to curb domestic demand.

Tight stance ‘crucial’

Inflation in Turkey, which is at around 9 percent, well above the government’s long-term target of 5 percent, also “calls for a restrictive monetary policy stance,” the report said.

Turkey manages to reduce these imbalances, but these weaknesses remain the economy’s threatening vulnerabilities, it added.

The prescription suggested by the OECD to cure these chronic weaknesses...