Deputy prime minister in charge of the economy, Mehmet Şimşek, announced the New Medium-Term Program covering 2018 to 2020 Wednesday at a press conference at the Development Ministry with Finance Minister Naci Ağbal and Development Minister Lütfi Elvan with high-level executives of public institutions in attendance.
Explaining that this year's indicators point out that an annual growth rate of 5.5 percent can be achieved throughout the year, Şimşek said that with the reforms to be implemented during the new program, the aim is to achieve a more balanced, sustainable and inclusive growth of 5.5 percent.
Şimşek also said that the main target of the new program will be pursuing macroeconomic stability, increasing human capital and labor quality, further improving the business and investment environment, promoting high added-value production, accelerating growth by increasing institutional capacity in the public sector, increasing employment and improving income distribution.Şimşek said that inflation is foreseen to be 9.5 percent at the end of the year, and stressed that a tight stance in monetary policy is expected to be maintained until inflation reaches the target in the near future.
Explaining that they aim for inflation to gradually improve, with a goal for it to fall to 5 percent during the program period, Şimşek said the unemployment rate is predicted to drop to single digits by 2019, and be 9.6 percent in 2020, which will be achieved despite strong labor force participation and an increase in the working-age population. "At the end of the Medium-Term Program covering 2018 to 2020, we estimate that per capita income will exceed $13,000," Şimşek said. "This level is above the threshold value set for reaching the upper income group as of today, according to the World Bank."
Evaluating developments in macroeconomic indicators related to Turkey, Şimşek said that growth performance has increased significantly in the last 15 years. Pointing out that the average growth rate of 4.7 percent from the foundation of the Republic to 2002 increased by one point to 5.6 percent during the period of their government, Şimşek said: "Do not underestimate one point: It makes a huge difference with a 100-year perspective."
'Our income gap with EU has decreased'
Şimşek said that the policies implemented in this period improved growth and per capita income considerably and that Turkey has climbed the social ladder.
He said that Turkey rose from the lower middle-income group to the upper middle-income group, recalling that the per capita income of $3,581 in 2002 increased by a factor of three to $10,883 as of 2016. "Per capita income based on purchasing power parity rose from $9,208 to $24,636. This income increase has enabled us to reduce the income gap with developed countries," Şimşek said. "Considering EU countries as 100, per capita income rose from 37 to 62 in dollar terms. Our income difference with the EU has decreased 25 points in 15 years."
Touching on the increase in employment, Şimşek said that Turkey creates an additional 910,000 jobs annually, on average, while other countries have had difficulty in creating employment after the 2008 global financial crisis. Şimşek said that unemployment rates have not reached the desired levels due to the rapid increase in labor force participation despite strong employment performance.
'We will reduce the current deficit once again'
Asserting that the current account deficit of the country is at a sustainable level, Şimşek recalled the ratio of current account deficit to national income, which reached 9 percent at the end of 2010, significantly better due to the decline in energy prices and measures taken by the government. "It is one of our primary objectives to keep the current deficit at a sustainable level with a more balanced growth composition in the coming period," Şimşek said. "The current account deficit dropped below 4 percent last year. We aim to bring it back below 4 percent at the end of the program period despite high growth rates."
Noting the distance covered in the fight against inflation, Şimşek said that their primary objective is to ensure permanent price stability for sustainable growth.
He said that a significant decrease was achieved in inflation with the policies they implemented, and that inflation, which was 9 percent on average in the last 14 years, had increased 70 percent in the previous 14 years period from 1989 to 2002. "Although it has recently seen double digits, it is among our top priorities to achieve persistent low levels in inflation with coordinated steps to be taken in structural areas as well as monetary policy focused on price stability during the New Medium-Term Program period," Şimşek added."One of the great achievements in the period of our governments is the provision of fiscal discipline in the public sector," Şimşek said, continuing that the budget deficit-to-GDP ratio, which was over 10 percent in 2002, dropped to 1.3 percent in 2016, and that the government is determined to protect fiscal discipline in the future, as well.
Şimşek said that the budget deficit in Turkey is at low levels and while the average general government deficit to national income ratio was 4.8 percent in emerging countries in 2016, it was around 1.3 percent in Turkey, adding that the debt-to-GDP ratio also declined considerably. "This ratio, which was over 72 percent in 2002, declined to 28.1 percent in 2016. The average debt-to-GDP ratio, which was 47.3 percent in developing countries in 2016, was 28 percent in Turkey." Explaining that they aim for inflation to gradually improve, falling to 5 percent during the program period, Şimşek said the current account deficit, which declined to 3.8 percent in 2016 compared to national income, is expected to increase slightly due to the deterioration in gold prices and energy balance in 2017. "[W]e expect that the current account deficit will gradually decrease to 3.9 percent by 2020 compared to the gross domestic product with the policies we will implement during the program period," Şimşek said. "We continue our efforts to improve the financing of the current account deficit. Improving the investment climate is our main priority.