Turkish FinMin: Uncertainty may affect Q1 growth, but no long-term impact expected.

By bne IntelliNews January 7, 2014

Political uncertainties may affect the growth in the first quarter negatively but it is still too early for a revision of the 2014 GDP growth forecast, finance minister Mehmet Simsek warned on Tuesday.

The government expects a GDP growth rate of 4% this year.

Once the political uncertainties die down, investments and private consumption will quickly recover after the elections (due in March), Simsek said, adding that the government does not currently consider additional measures to support growth but authorities may act when they see such measures necessary.

Simsek also expects the depreciation of TRY and slowing demand to lead to an improvement in current account deficit. A 10% loss in the value of the lira adds around 1.5% to inflation, but companies will not be able to raise their prices in the face of weak demand, Simsek said.

The government will not seek an “election economy” (meaning extra government spending) in the run up to the elections, Simsek stressed.

Turkey has entered a cycle of elections; local elections are scheduled for March and presidential election is due in August. Simsek said earlier this week that he had a conference call with a large group of foreign investors to calm their concerns over the political tension and the economy.

However, the power struggle between the government and the Gulen movement, led by U.S-based influential cleric, Fethullah Gulen, shows no sign of easing yet. The government purged more than 300 police officers in Ankara overnight while the police arrested more than 25 people, including bureaucrats and businessmen, in five cities in a port-related corruption probe on Tuesday.

Erdogan maintains that the on-going graft allegations and investigations are a plot, orchestrated by what he calls a “state within state” to discredit the government. Erdogan also says foreign elements too are behind this conspiracy against his government. The pro-government media claims that the followers of Fethullah Gulen infiltrated the police and judiciary services, blaming the Gulenist movement for the corruption related-high profile arrests. Erdogan has been trying to consolidate his conservative supporter base by claiming that domestic and international elements are also targeting the well-being of ordinary citizens.

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