CBRT head Başçı stresses tight monetary policy

Published 06.11.2015 00:00

Central Bank of the Republic of Turkey (CBRT) Governor Erdem Başçı delivered a presentation titled "Balanced Growth Outlook in Turkey" at the second International Economy Congress, which stressed that the current monetary policies applied in Turkey are tight in terms of inflation rates, balanced for foreign exchange liquidity and supportive of financial stability. He also said tight monetary policies will be maintained until the inflation rate significantly decreases.

According to Başçı's presentation, the improvement in the current account balance is anticipated to continue, as it will the increase in demand from Europe to support growth and balance. Furthermore, with the implementation of the announced economic reforms, Turkey's growth potential is expected to escalate.

Başçı said Turkey is experiencing moderate growth, and described the conditions that will continue to lead to growth "Applied policies, the recovery in Europe, lower commodity prices and structural reforms are drivers of balanced growth. The structural reforms - the real drivers of growth in Turkey - were mainly implemented in domestic savings, human capital and the labor market, technology and innovation, and physical infrastructure," Başçı said. Furthermore, the presentation stressed that the undeterred tight monetary policies applied were the core reason behind the drop in inflation rates. The financial discipline risk premium indicators were maintained at lower levels as well. The sustainability of household debt was another reason behind the drop in the current account deficit and also supported balanced growth.

Accordingly, macroprudential arrangements and policies play an important role in the recovery of the credit growth rate and loan composition, and also support the decrease in the current account deficit. The recovery seen in the current account balance is expected to continue as well as the recovery in the EU, according to the presentation. Turkey's exports to EU countries continued to increase and Turkey has obtained a larger share of the EU's imports. The presentation also highlighted that the positive effect of the drop in global oil prices is to become more evident within the coming months.

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