Istanbul: Any stalling of reforms would have a negative impact on growth in Turkey, Deputy Prime Minister Mehmet Simsek said on Friday, a day after the prime minister said he would step down, triggering renewed political uncertainty.
Prime Minister Ahmet Davutoglu said on Thursday he would bow out as leader of the ruling AK Party, and therefore as premier, later this month after weeks of increasingly public tensions with President Tayyip Erdogan.
Davutoglu’s departure raises questions about the government’s ability to tackle slowing growth and pass the structural reforms investors say are long overdue.
“If reforms are partial or if they do not progress at all, this will of course affect growth negatively,” Simsek, the main government minister in charge of the economy, said in a speech in Istanbul.
He also said Turkey would not be able to achieve 5 per cent annual economic growth on the basis of its “current efforts”.
Reforms
Turkey needs more foreign investment to plug a yawning current account deficit of around 4.5 per cent of GDP and finance its heavily indebted companies. Investors want to see reforms to boost the savings rate and liberalise the labour market.
The departure of Davutoglu — who, like Simsek, is seen as a proponent of orthodox economic policies — has worried investors that Erdogan, who champions low interest rates and consumption-based growth, will tighten his hold over economic management.
Erdogan has frequently railed against high interest rates, equating them with treason.
In a column in the pro-government Daily Sabah newspaper on Friday, columnist Hilal Kaplan laid out several reasons for Davutoglu’s departure. One of them, she said, was his reluctance to fight the “pro-interest mindset”.
Simsek also said that the decline in the lira was the most important factor in determining inflation.
