Turkey economy slowed sharply in '07-

Reuters
Tuesday January 15 2008
(Adds comments from interview with minister)
By Daliah Merzaban
DUBAI, Jan 15 (Reuters) - Turkish economic growth last year slowed significantly because of a doubling in energy prices and a drought, but growth of 4 to 4.5 percent would still be a good performance, Economy Minister Mehmet Simsek said on Tuesday.
"Growth has slowed down significantly in 2007. It is simply a number of supply side shocks; energy prices doubling and a drought," Simsek told an investors' conference in Dubai.
Economic growth of between 4 percent and 4.5 percent would be "quite a strong performance", he added.
Simsek told Reuters in an interview after the conference the government would speed up its privatisation programme and would decide by March how to sell its 75 percent stake in Halkbank.
Agricultural output in the first three quarters of 2007 shrank nearly 6 percent, he said at the conference organised by EFG Istanbul Securities.
Turkey had a 5 percent growth target for 2007, but third-quarter data showed gross national product growing at only 2 percent. The growth target for 2008 is 5.5 percent, and actual growth in 2006 was 6.0 percent.
Simsek said reducing inflation was critical to achieving the government's economic growth targets.
"Inflation is likely to trend downward ... If we continue to privatise, promote competition, attract foreign direct investment and make the labour market more flexible, I think that will help reduce inflation," he said.
Simsek said he was optimistic that inflation in the medium term would be in the low single digits.
Turkey's consumer price inflation in 2007 came in at 8.39 percent, twice the government's 4 percent target.
PRICE STABILITY
"Price stability is absolutely critical because without that it would be difficult to sustain these growth rates," Simsek said, referring to a medium-term 7 percent potential target rate for Turkey.
Simsek said he expected tourism revenues at $18-$20 billion in 2007 and this should rise to $30 billion in the next few years as foreign tourist numbers rise to 30 million from 22 million at present.
Simsek said the government would speed up its privatisation drive in 2008, when Ankara hopes to sell off tobacco firm Tekel, a 75 percent stake in Halkbank , electricity distributions grids and sugar factories.
The government would decide by March whether to sell its Halkbank stake to a strategic investor or via a secondary public offering, with a sale concluded by the end of the year, he said.
Turkey attracted $19 billion in foreign direct investment in 2007 including revenues from privatisation, and would at least match this figure this year, the minister said.
The Halkbank sale alone would generate $9 billion in revenues, according to EFG Istanbul estimates.
"Privatisation is gaining momentum," Simsek said. "While the global backdrop has somewhat weakened, Turkey plans to accelerate the privatisation programme."
Privatisation of the country's electricity production assets would be completed in 2011 or 2012, rather than an initial 2010 goal, he said.
Simsek said the government aimed to have a business-friendly new constitution in the second half of 2008.
"In the second half of 2008, we will have a brand new constitution that will be business-friendly and involve more individual freedoms," he said.
Simsek's ruling centre-right AK Party is drawing up a new draft constitution for Turkey, a European Union candidate country, to replace the current document, which dates back to a period of military rule in the early 1980s.
Turkey is also on target to pass a social security reform law through parliament by the end of the month, he said. (Editing by Selcuk Gokoluk and Stephen Nisbet)