Transcript: Turkey’s Treasury Minister Albayrak on Growth, Borrowing
(Bloomberg) -- Turkey’s Treasury and Finance Minister Berat Albayrak spoke to Bloomberg TV’s Francine Lacqua in a televised interview at the World Economic Forum in Davos, Switzerland, where he met investors and state officials from around the world. Albayrak said the current slowdown in growth is probably a good thing for the economy and in line with his soft-landing strategy.
Below is a transcript of the highlights of the interview that was conducted in English. Words in brackets are added for clarity:
FL: You’ve been busy in Davos with investors. 2018 and 2017, there was a lot of talk of Turkey. What are investors asking of you?
Min.: Thankfully, we have delivered what we have promised so far for the year-end. This is going like how we have planned. So far so good. The crucial stuff here is Turkey’s going to be very much aligned with a very quality-based growth. There has to be some slowing down. This is soft landing strategy. 2019 will be [a] very much promising year for us.
FL: There’s speculation that Turkey will see technical recession in the fourth quarter. Is this healthy for a re-balancing period?
Min.: For sure we’re going to see a significant slowdown but is it going to be a recession sign, or you know, close to zero? But we’re going to closely follow it not [only] the fourth quarter but this first quarter as well. The thing is we’re pushing very hard [to make sure] that it has to be for soft-landing purposes. Following the second quarter...Turkey’s going to be very much aligned with what we have planned for the 2019 growth, which was 2.3 percent. So it’s very much on track.
FL: Do you worry about being impacted by world affairs, such as the U.S.-China trade war and things like that?
Min.: After June 2018 elections we entered a new system which is very much straightforward. From that point on, we have been focused on three vulnerabilities: budget discipline, fighting inflation and current-account deficit strategy. In the last six months we have had a very strong execution all of these three.
2018 was a tough year but at the end of the year we have achieved our budget [deficit] target with 1.9 percent [of gross-domestic product]. Inflation was a tough one. We reached around 25 percent but thankfully, we have reached 20.3 percent at the end of the year, which is below the target. And current-account deficit...we have a significant decrease, on average 25-to-30 percent in in imports and 8-to-10 percent increase in exports.
FL: Minister, you’ve been really careful at avoiding any comments on the central bank. Is that because you’re concerned it will hurt their ability to make decisions?
Min.: In meetings with investors I say that this is the first time ever that monetary and fiscal policy alignment is the best in decades. Why? Because everybody is doing their job. But you can only fight against inflation with both fiscal and monetary policies and they have to be aligned. I think the central bank is doing its job very well in the last couple of months and they have proved how independent and how strong they are and I think they are going to do their job from now on.
FL: Minister, the government has been borrowing heavily this year by tapping domestic investors for hard currency. Meanwhile you’re cutting back on lira issuances since November. Is this a conscious effort to keep the lira interest rates low?
Min.: This new term brought very significant advantages to the economy management. We’re going to be very active and aggressive on Treasury management as well... Currency-wise, maturity-wise, interest rates-wise, we can be very active. The successful Treasury management also depends on how we’re going to borrow, how much we’re going to borrow and at what cost we’re going to borrow. It’s normal to see a bit different stuff than the previous stuff our Treasury has done.
FL: So when do you think you’ll have the answers to some of those questions? The next six months or will it take a little bit longer?
Min.: This first quarter started very well, [better than] I ever expected, in terms of [the lira’s] appreciation, interest rates declined significantly.
FL: What’s the government’s plan to boost loan growth?
Min.: Our main focus is not having a big growth but [having] a quality growth. [The] Turkish economy has a very significant strategic advantage. Turkey is a very dynamic economy, not only an internal consumption-based economy. Turkey’s region is not a simple one -- some say one of the worst but it comes with significant opportunities. Two-thirds of oil and gas reserves are around us. This kind of strategic advantage comes with a very competitive private sector. So we’re going to focus on our competitive advantages.
FL: Minister, what is the question that you get asked most frequently by investors? Is it on the central bank, is it on the currency, is it on the growth?
Min.: They ask ‘is it the right time to be in Turkey?’ I tell all of them all the time: Turkey’s never going to be this desirable again or cheap again. Why am I so confident? I say that I know my balance sheet. I know my strengths and weaknesses. What I know is that Turkey has a very strong balance sheet.
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