Reforms to Strengthen Economic Stability Will Help Turkey's Growth and Jobs

IMF's Christine Lagarde on first trip as Managing Director to key global, regional economic player

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The trip to Turkey is part of a series of visits to the IMF's member countries by Lagarde, including other key emerging economies such as Brazil, China, India, Russia and South Africa.

As one of the largest emerging economies, Turkey is gaining representation and voice in the IMF and in the Group of Twenty advanced and emerging economies.

“Turkey has had a remarkable period of growth over the last ten years, more than doubling per capita income and reducing poverty," said Lagarde. "However, vulnerabilities are arising as a result of the large current account deficit financed by short-term capital flows."

This is why it is important that Turkey should continue to implement a sound combination of macroeconomic, fiscal, and structural reforms to sustain stability and growth into the future.

Slow and steady wins the race

Lagarde said that after two years of fast growth, which has increased the current account deficit and made the economy more vulnerable to changes in investors' risk appetite, the economy has now entered a period of more moderate growth.

Lagarde said the IMF expects Turkey’s economy to grow by 2.3 percent in 2012.

She noted that slower growth has benefits as this will help reduce inflation and the current account deficit, which at close to 10 percent of GDP, represents a vulnerability.

The short-term nature of the capital flows that have financed the country's low savings rate expose Turkey to the vagaries of international capital markets.

The IMF is projecting an improvement in Turkey's current account of about 1 percent of GDP for 2012...