(Bloomberg) -- The Middle East’s largest economy probably broke free of its first recession in a decade, according to Turkish Treasury and Finance Minister Berat Albayrak.
Turkey may already be on course to recovery after ending last year with two consecutive quarters of contraction following a currency crash, Albayrak said Monday, citing preliminary data through the first three months of 2019.
Contradicting widespread assumptions by investors, he said a liquidity shortage in the swaps market used to stabilize Turkey’s currency before last month’s elections wasn’t orchestrated by the government, which acted in line with “free-market rules.” Albayrak said Turkey wants to capitalize on an election-free period of more than four years following the March 31 municipal vote so that economic policy makers can act without political pressure.
“We’ve come out of a difficult period with a minimum amount of damage,” Albayrak said. “We’ll take whatever steps necessary to meet our targets because there are no elections ahead of us. We will take those steps with great ease.”
In an attempt to rev up the economy, the minister recently unveiled a plan to bolster the nation’s banking sector that’s saddled with souring debt and reeling from years of currency depreciation. The program met with skepticism by some investors who questioned if it’s sufficient following a meeting with the minister in Washington last week.
Divergent Views
A key test for the finance chief will be to meet his self-imposed growth target of 2.3 percent in 2019, which remains sharply at odds with forecasts for a continued contraction by most economists. The International Monetary Fund just reversed its call for a slight gain in gross domestic product and now expects a decline of 2.5 percent this year.
The green shoots in Turkey’s economy are few and far between. The ranks of the unemployed swelled by 366,000 people in one month, pushing the jobless rate in January to the highest level in a decade. Still, industrial production in February fell less than forecast in the smallest contraction since September.
But a continued weakness of domestic demand is weighing on Turkey’s growth prospects following last year’s deprecation of 28 percent in the currency. It showed signs of stress again before the March elections and has remained unsteady following a liquidity crunch in an offshore swap market frequently used by foreign banks trading in liras.
To contact the reporter on this story: Firat Kozok in Ankara at fkozok@bloomberg.net
To contact the editors responsible for this story: Onur Ant at oant@bloomberg.net, ;Alaa Shahine at asalha@bloomberg.net, Paul Abelsky, Amy Teibel
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