Download DISINFLATION AND BALANCE OF PAYMENTS IN THE TURKISH ECONOMY Erdem Ba

DISINFLATION AND BALANCE
OF PAYMENTS IN THE TURKISH
ECONOMY
Erdem Başçı
Deputy Governor
Central Bank of Turkey
March 4, 2008
1
Presentation Outline
1)
1) Inflation
Inflation and
and Monetary
Monetary Policy
Policy
••
Recent
Recent Developments
Developments
••
Monetary
Monetary Policy
Policy Stance
Stance
••
Demand
Demand Conditions
Conditions
••
Inflation
Inflation Outlook
Outlook
2)
2) Balance
Balance of
of Payments
Payments
••
Sources
Sources of
of Current
Current Account
Account Deficit
Deficit
••
Foreign
Foreign Trade
Trade Developments
Developments
••
Capital
Capital Flows
Flows
2
Inflation – Recent Developments
Annual CPI Inflation and Target Path
Central
Central Bank
Bank of
of Turkey
Turkey (CBT)
(CBT) isis implementing
implementing aa
formal
formal inflation-targeting
inflation-targeting regime
regime since
since the
the beginning
beginning of
of
(December 2005 – December 2007 , yoy, percent)
2006.
2006.
12
11
10
9
8
7
6
5
4
3
2
1
0
Central
Central Bank
Bank has
has been
been decisively
decisively fighting
fighting against
against
inflation
inflation for
for the
the last
last seven
seven years.
years.
--
percentage
percentage points
points between
between the
the years
years
2001
2001 and
and 2005.
2005.
Annual CPI Inflation
Target Path
-12.07
10.07
08.07
06.07
04.07
02.07
12.06
10.06
08.06
06.06
04.06
02.06
Outer Band
12.05
Inflation
Inflation targets
targets were
were achieved
achieved and
and
inflation
inflation was
was lowered
lowered by
by more
more than
than 60
60
Inflation
Inflation exceeded
exceeded the
the targets
targets in
in 2006
2006
and
and 2007.
2007.
Disinflation
Disinflation isis aa dynamic
dynamic and
and ongoing
ongoing process.
process.
Source: TURKSTAT, CBT
3
Inflation – Main Causes
Contribution to End-year CPI Inflation
Food
Food prices
prices were
were the
the main
main factor
factor
impeding
impeding disinflation
disinflation in
in 2007,
2007, with
with aa
(percentage share)
2004-2006 Average
Others
49.4 %
marked
marked contribution
contribution of
of about
about 3.4
3.4
percent
percent on
on headline
headline inflation.
inflation.
2007
Food*
23.9 %
Others
30.1 %
Food*
40.8 %
Others
The
The contribution
contribution of
of food
food prices
prices to
to the
the
headline
headline inflation
inflation in
in 2007
2007 was
was
significantly
significantly higher
higher than
than itit had
had been
been
during
during the
the past
past three
three years
years
49.5 %
Energy
17.0 %
Tobacco**
Tobacco**
10.4 %
9.7 %
Energy
18.7 %
* Food: Food and non-alcoholic beverages
** Tobacco: Tobacco products and alcoholic beverages
Source: TURKSTAT,CBT
4
Inflation – Subcomponents
Subcomponents of CPI
Annual
Annual inflation
inflation in
in certain
certain subgroups
subgroups of
of the
the
(Annual Percentage Change)
CPI
CPI reveals
reveals the
the main
main factors
factors behind
behind the
the rise
rise in
in
20
2006
18
2007
inflation
inflation in
in 2007
2007 Better-than-expected
Better-than-expected inflation
inflation
figures
figures in
in the
the services
services sector
sector in
in the
the second
second and
and
16
14
third
third quarters
quarters of
of the
the year
year gave
gave aa positive
positive signal
signal
12
for
for inflation
inflation outlook.
outlook.
10
The
The fast
fast pace
pace of
of disinflation
disinflation in
in services
services and
and
8
core
core goods
goods (goods
(goods excluding
excluding food,
food, energy
energy and
and
6
4
tobacco)
tobacco) in
in 2007,confirms
2007,confirms that
that supply
supply side
side
2
shocks
shocks were
were mainly
mainly responsible
responsible for
for the
the breach
breach of
of
0
Energy
Food*
Tobacco**
Goods exc.
Food, Energy
and Tobacco
Services
the
the uncertainty
uncertainty band.
band.
* Food: Food and non-alcoholic beverages
** Tobacco: Tobacco products and alcoholic beverages
Source: TURKSTAT, CBT
5
Inflation – Services
Subcomponents of Services Inflation
The
The effects
effects of
of the
the monetary
monetary tightening
tightening were
were
(Annual % Change)
clearly
clearly visible
visible on
on the
the prices
prices of
of durable
durable goods
goods and
and
20
2006
2007
16
services,
services, consistent
consistent with
with the
the slowdown
slowdown in
in the
the
economic
economic activity
activity of
of related
related sectors.
sectors. The
The weaker
weaker
12
8
demand,
demand, coupled
coupled with
with aa strong
strong domestic
domestic
4
currency,
currency, helped
helped durables
durables inflation
inflation to
to come
come down
down
Other Services
Restaurants&Hotels
Rent
Transport Services
0
significantly.
significantly.
Services
Services inflation
inflation also
also eased
eased remarkably,
remarkably,
declining
declining by
by 3.6
3.6 percentage
percentage points
points throughout
throughout
2007.
2007.
Source: TURKSTAT, CBT
6
Inflation Worldwide
Inflation in Other Regions*
Lately,
Lately, inflation
inflation has
has been
been rising
rising almost
almost all
all over
over
the
the world
world In
In 2007,
2007, food
food group
group has
has added
added 3.4
3.4
6
percentage
percentage points
points to
to annual
annual inflation.
inflation.
USA
Elevated
Elevated prices
prices of
of crude
crude oil,
oil, agricultural
agricultural products
products
Euro Area
5
and
and other
other commodities
commodities have
have continued
continued to
to exert
exert
Inf. Tar.
inflationary
inflationary pressures.
pressures.
4
Although
Although second
second round
round effects
effects have
have been
been so
so far
far
limited–thanks
limited–thanks to
to well-established
well-established credibility
credibility of
of
3
monetary
monetary authorities
authorities all
all over
over the
the world,
world, sustained
sustained
increases
increases in
in commodity
commodity prices
prices have
have started
started to
to take
take
2
their
their toll
toll on
on headline
headline inflation,
inflation, ifif not
not on
on core
core inflation.
inflation.
12.07
10.07
08.07
06.07
04.07
02.07
12.06
10.06
08.06
06.06
04.06
02.06
12.05
1
*Sample of emerging economies under inflation targeting covers Brazil, Czech Republic,
Colombia, Philippines, South Africa, Israel, Hungary, Mexico, Peru, Poland, Romania, Chile,
Slovakia and Thailand.
Source: Web sites of central banks
7
Inflation – Relative Success
Difference Between Turkey and Other Emerg.
IT’ers Inflation Rates
9
Monetary
Tightening
8
In
In 2007
2007 inflation
inflation in
in Turkey
Turkey followed
followed aa more
more
Start of the
Easing Cycle
favorable
favorable trend
trend compared
compared to
to other
other emerging
emerging
economies
economies with
with inflation
inflation targeting,
targeting, despite
despite the
the
administrative
administrative price
price hikes
hikes in
in November,
November, which
which
7
added
added by
by about
about 1-percentage
1-percentage points
points to
to the
the
Turkish
Turkish CPI
CPI inflation.
inflation.
6
5
4
3
12.07
10.07
08.07
06.07
04.07
02.07
12.06
10.06
08.06
06.06
04.06
02.06
12.05
2
*Sample of emerging economies under inflation targeting covers Brazil, Czech Republic,
Colombia, Philippines, South Africa, Israel, Hungary, Mexico, Peru, Poland, Romania, Chile,
Slovakia and Thailand.
Source: Web sites of central banks
8
Monetary Policy and Core Indicators
Response of Inflation to the Monetary
Tightening
Annual
Annual percentage
percentage change
change in
in CPI
CPI
excluding
excluding food,
food, energy
energy and
and tobacco
tobacco items
items
19
12,0
indicate
indicate an
an inflation
inflation trend
trend of
of around
around 4.5
4.5
percent.
percent.
10,0
Underlying
Underlying inflation
inflation isis not
not far
far away
away from
from
the
the medium
medium term
term target.
target. Under
Under the
the
8,0
assumption
assumption that
that oil
oil and
and food
food inflation
inflation will
will
follow
follow aa more
more benign
benign path
path in
in 2008
2008 than
than in
in
18
17
16
15
6,0
14
13
2007,
2007, itit isis fair
fair to
to expect
expect some
some contribution
contribution
to
to disinflation
disinflation from
from the
the base
base effects.
effects.
4,0
Policy Rate
12
H (right axis)
2,0
H (excl. processed food, right
axis)
11
12-07
09-07
06-07
03-07
12-06
09-06
06-06
03-06
12-05
10
Source: CBT
9
Monetary Policy Stance
Monetary Policy Committee (MPC)
Decisons in 2007 and 2008
Dates for MPC
Meeting
The
The turbulence
turbulence in
in mature
mature financial
financial markets
markets in
in
August
August increased
increased the
the likelihood
likelihood of
of aa sooner-thansooner-than-
Decision on Interest
Rate
Interest Rate
16 January 2007
No Change
17.50
and
and thus
thus paved
paved the
the way
way for
for initiating
initiating the
the policy
policy
15 February 2007
No Change
17.50
rate
rate cuts
cuts that
that was
was hinted
hinted earlier
earlier in
in the
the year.
year.
15 March 2007
No Change
17.50
18 April 2007
No Change
17.50
14 May 2007
No Change
17.50
14 June 2007
No Change
17.50
Policy
Policy rates
rates were
were lowered
lowered by
by 225
225 basis
basis points
points
12 July 2007
No Change
17.50
since
since then.
then.
14 August 2007
No Change
17.50
13 September 2007
-.25
17.25
16 October 2007
-.50
16.75
14 November 2007
-.50
16.25
13 December 2007
-.50
15.75
17 January 2008
-.25
15.50
14 February 2008
-.25
15.25
Source: CBT
envisaged
envisaged slowdown
slowdown in
in global
global economic
economic activity,
activity,
Accordingly,
Accordingly, the
the MPC
MPC decided
decided to
to start
start aa
measured
measured rate
rate cut
cut cycle
cycle in
in September
September 2007.
2007.
10
Monetary Conditions
Real Interest Rate and Real Exchange Rate*
Although
Although medium
medium term
term interest
interest rates
rates followed
followed aa
downward
downward trend
trend in
in the
the past
past quarter,
quarter, 2-year
2-year real
real
200
14
190
13
180
12
percent,
percent, implying
implying aa non-accommodative
non-accommodative
170
11
monetary
monetary stance.
stance.
160
10
The
The currency
currency remains
remains strong,
strong, curbing
curbing
9
inflationary
inflationary pressures
pressures and
and easing
easing the
the impact
impact of
of
8
rising
rising commodity
commodity prices
prices on
on domestic
domestic production
production
150
Real Exchange Rate (Left Axis)
140
2 -year Real Interest Rates
130
7
costs
costs
11.07
09.07
07.07
05.07
03.07
01.07
11.06
09.06
07.06
05.06
03.06
6
01.06
120
rates
rates at
at this
this point
point fluctuate
fluctuate around
around 99 to
to 10
10
*Real interest rates are computed by using the Expectations Survey and 2-year nominal rate
estimated with Extended Nelson-Siegel method. Real exchange rate is CPI based (an
increase means an appreciation).
Source: CBT
11
Demand under Control
Real Private Consumption
(Quarterly, seasonally adjusted)
Strong
Strong monetary
monetary tightening
tightening was
was effective
effective in
in
Monetary
Tightening
26000
moderating
moderating the
the private
private consumption
consumption demand
demand
25000
Although
Although government
government spending
spending accelerated
accelerated
24000
2007-III
2007-II
2007-I
2005-II
2005-I
20000
2006-IV
successful
successful in
in curbing
curbing the
the aggregate
aggregate demand,
demand,
2006-III
21000
2006-II
following
following quarters,
quarters, monetary
monetary tightening
tightening was
was
2006-I
22000
2005-IV
and
and external
external demand
demand remained
remained strong
strong in
in the
the
2005-III
23000
especially
especially through
through the
the slowdown
slowdown in
in durable
durable
goods,
goods, housing
housing and
and other
other services.
services.
Source: TURKSTAT, CBT
12
Moderate Credit Growth
Selected Subitems of Consumer Loans
Credit
Credit data
data also
also suggest
suggest that
that monetary
monetary
(Annual Percentage Change)
450
60
Housing
conditions
conditions are
are non-accommodative.
non-accommodative.
50
Annual
Annual growth
growth rates
rates in
in the
the automobile
automobile and
and
40
housing
housing loans
loans are
are much
much lower
lower compared
compared to
to
300
30
the
the periods
periods of
of vigorous
vigorous domestic
domestic demand
demand
250
20
200
10
150
0
100
-10
50
-20
0
-30
400
01.08
10.07
07.07
04.07
10.06
07.06
04.06
01.06
10.05
07.05
01.07
Automobile (right axis)
350
Source: CBT
13
No Demand Pressures
Output Gap
Another
Another factor
factor likely
likely to
to contribute
contribute to
to
disinflation
disinflation isis aa continuing
continuing output
output gap.
gap.
6
Economic
Economic activity
activity responded
responded significantly
significantly
4
to
to the
the strong
strong monetary
monetary tightening
tightening in
in midmid2006.
2006.
2
The
The sharp
sharp slowdown
slowdown in
in the
the second
second half
half of
of
0
2006
2006 created
created an
an ample
ample slack
slack in
in the
the
-2
economy.
economy. There
There are
are some
some signs
signs of
of recovery
recovery
-4
in
in the
the second
second half
half of
of 2007.
2007.
-6
-8
07-III
07-I
06-III
06-I
05-III
05-I
04-III
04-I
03-III
03-I
02-III
02-I
01-III
01-I
00-III
00-I
-10
Source: CBT
14
Expectations Improving Slowly
Medium Term Inflation Expectations
Both
Both the
the 12-month
12-month and
and the
the 24-month
24-month ahead
ahead
inflation
inflation expectations
expectations exhibited
exhibited aa declining
declining
14
pattern
pattern throughout
throughout 2007.
2007.
12
12-Months
forward
24-Months
forward
10
8
However,
However, the
the improvement
improvement in
in expectations,
expectations,
especially
especially in
in the
the last
last quarter,
quarter, was
was rather
rather limited,
limited,
owing
owing to
to aa backward
backward looking
looking behavior,
behavior, and
and
possibly,
possibly, due
due to
to pre-announced
pre-announced hikes
hikes in
in
administered
administered energy
energy prices.
prices.
5,99
5,2
6
Nevertheless,
Nevertheless, itit isis worthwhile
worthwhile to
to mention
mention that
that
the
the administrative
administrative price
price hikes
hikes in
in November
November had
had
little
little effect
effect on
on medium
medium term
term expectations.
expectations.
4
2
01-10
10-09
07-09
04-09
01-09
10-08
07-08
04-08
01-08
10-07
07-07
04-07
01-07
10-06
07-06
04-06
01-06
10-05
07-05
04-05
01-05
0
Source: CBT
15
Inflation Outlook
Inflation Projections*
We
We forecast
forecast inflation,
inflation, with
with 70
70 percent
percent
probability,
probability, between
between 4.1
4.1 percent
percent and
and 6.9
6.9
Forecast range*
Uncertainty band for 2008
Medium term target
12
11
percent
percent (midpoint
(midpoint 5.5)
5.5) at
at the
the end
end of
of 2008,
2008,
10
and
and between
between 1.8
1.8 percent
percent and
and 5.5
5.5 percent
percent
9
(midpoint
(midpoint 3.7)
3.7) at
at the
the end
end of
of 2009.
2009.
8
7
The
The forecasts
forecasts are
are based
based on
on aa scenario
scenario in
in
6
5
which
which policy
policy rates
rates display
display aa limited
limited decline
decline
4
in
in 2008.
2008. Main
Main message
message of
of the
the forecast
forecast isis
3
that
that continuation
continuation of
of the
the gradual
gradual easing
easing cycle
cycle
2
2009-IV
2009-III
2009-II
2009-I
2008-IV
2008-III
2008-II
conditional
conditional on
on favorable
favorable data
data and
and
2008-I
0
2007-IV
that
that started
started in
in September
September 2007
2007 will
will remain
remain
2007-III
1
developments.
developments.
*The shaded region indicates the 70 percent confidence interval for the forecast.
Source: CBT
16
Balance of Payments
Why
Why Current
Current Account
Account Deficit?
Deficit?
Domestic
Domestic savings
savings below
below investments
investments
‘Sustainability’
‘Sustainability’ and
and ‘adjustment
‘adjustment ability’
ability’ are
are two
two main
main issues
issues
17
Savings and Investment
Current Account Deficit
5
(percentage of GDP)
Why
Why Current
Current Account
Account Deficit?
Deficit?
2,3
0
-0,8
Current
Current account
account balance
balance deteriorated
deteriorated by
by 10
10
percentage
percentage points
points between
between 2001
2001 and
and 2007
2007
-3,3
-5,2
-5
-6,4
-7,4
-8,2
-10
2001
2002
2003
2004
2005
2006
2007*
Domestic Savings and Domestic Investment
30
(percentage of GDP)
Investments
25,4
25
24,9
23,8
24,8
22,6
20,0
19,2
20
19,3
15
Between
Between 2001
2001 and
and 2007:
2007:
20,2
18,2
17,5
16,0
15,1
Domestic
Domestic savings
savings are
are below
below
investments
investments
17,0
Savings
Savings decreased
decreased by
by 0.5
0.5 points
points and
and
investment
increased
by
9.7
points
investment increased by 9.7 points
Savings
10
2001
2002
2003
2007 figures are from the 2007 economic program
Source: TURKSTAT, SPO
2004
2005
2006
2007*
18
Export Performance
Turkey
Turkey is
is the
the one
one of
of
the
the best
best export
export
Export Growth Rate
(2001 - 2007, average annual growth, percent)
performers
performers in
in the
the world.
world.
24
20.1
20
17.2
16
12
growth
growth in
in exports
exports was
was
17.2
17.2 percent.
percent.
"
8.8
8
8.8
5.9
Between
Between 2001
2001 and
and
2007,
2007, average
average annual
annual
5.9
4
0
World
Euro area
Developing Asia
Middle East
Western
Hemisphere
Turkey
2007 figures are from IMF forecasts.
Source: TURKSTAT, IMF World Economic Outlook
19
Trade balance
Imports and Exports Quantity Indices
160
(1982 – 2007, 2003 = 100, Annual Average)
140
120
The
The openness
openness of
of the
the Turkish
Turkish economy
economy
has
has accelerated
accelerated since
since 2001.
2001.
Imports
100
80
60
40
20
According
According to
to the
the quantity
quantity indices
indices adjusted
adjusted for
for
Exports
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
-
(January 2006 – December 2007, 12-month cumulative
annual percentage change)
Exports
Exports growth
growth rate
rate was
was 25.3%
25.3% in
in 2007,
2007, while
while
that
that of
of imports
imports stood
stood at
at 21.8%.
21.8%.
26
Imports
24
imports
imports have
have expanded
expanded almost
almost in
in parallel
parallel in
in recent
recent
years,
years, contrary
contrary to
to the
the 1995-2000
1995-2000 period.
period.
Imports-Exports
28
exchange
exchange rate
rate and
and price
price movements,
movements, exports
exports and
and
Annual
Annual growth
growth rate
rate of
of exports
exports has
has outpaced
outpaced that
that
22
20
18
16
of
of imports
imports since
since March
March 2007.
2007.
Exports
14
12
Source: TURKSTAT
11-07
12-07
09-07
10-07
04-07
05-07
06-07
07-07
08-07
02-07
03-07
10-06
11-06
12-06
01-07
08-06
09-06
01-06
02-06
03-06
04-06
05-06
06-06
07-06
10
20
Effects of Energy Prices
Current Account Balance and the Effect of
Energy Prices on Current Account Deficit *
(2002 – 2007, ratio to GDP, percent)
2002
2003
2004
2005
2006
the
the increase
increase in
in CAD
CAD in
in recent
recent years.
years.
2007**
0
-1
-2
Current account Deficit
Excluding the Effect of
Energy Prices
-0.8
-4
-3.7
-3.4
-4.1
-3.3
High
High energy
energy prices
prices added
added 4.1
4.1 percentage
percentage
points
points to
to the
the deficit
deficit in
in 2006.
2006.
The
The deficit
deficit would
would have
have been
been 4.1
4.1 %
% of
of GDP
GDP in
in
2006,
2006, ifif the
the energy
energy prices
prices had
had remained
remained at
at its
its
2002
2002 level.
level.
-2.4
-3
The
The surge
surge in
in energy
energy prices
prices was
was influential
influential on
on
-3.7
High
High energy
energy prices
prices added
added 3.8
3.8 percentage
percentage
points
points to
to the
the deficit
deficit as
as of
of 2007
2007 Q3.
Q3.
-5
-5.2
-6
-6.3
-7
-8
Current Account Deficit /
GDP
-7.5
-8.2
-9
* The effect of energy price increases on the current account in the 2003-2007 period was
calculated by keeping the prices of 2002 intact. Energy Sub-Items: Stone coal and lignite,
crude oil and natural gas under the mining and quarrying sector, and coke coal, refined
petroleum products and nuclear fuels under the manufacturing industry.
** As of the third quarter of 2007
Source: TURKSTAT, CBT
21
Current Account Deficit and Its Financing
Foreign Direct Investment
(Annual,
30
billion USD)
Directdirect
Investment
2007,
investment
In
InForeign
2007, foreign
foreign
direct
investment (FDI)
(FDI) net
net
Inflows
inflows
inflows was
was USD
USD 21.9
21.9 billion.
billion.
25
21,9
20,0
20
According
According to
to UNCTAD,
UNCTAD, Turkey
Turkey ranked
ranked fifth
fifth
among
among emerging
emerging countries
countries in
in FDI
FDI in
in 2006.
2006.
15
The
The strong
strong performance
performance in
in FDI
FDI inflows
inflows isis
expected
expected to
to continue.
continue.
10,0
10
5
1,0
1,1
1,8
Average
of 19902001
2002
2003
2,9
0
2004
2005
2006
2007
Source: CBT
FDI in 2006 Ratio to GDP
(USD Billion)
(%)
China
69.5
2.6
Hong Kong
42.9
22.6
Russia
28.7
2.9
Singapore
24.2
18.3
Turkey
20.1
5.0
Mexico
19.0
2.3
Brasil
18.8
1.8
India
16.9
1.9
Romania
11.4
9.4
Chile
7.9
5.4
Source: UNCTAD, IMF WEO
22
Capital Flows
Financing of the Current Account Deficit
(2000 – 2007, 12-month cumulative, % of deficit)
The
The ratio
ratio of
of the
the sum
sum of
of foreign
foreign direct
direct
80
Portfolio
investments 4
Non-bank
loans 2
investments
investments and
and long-term
long-term capital
capital to
to GNP
GNP which
which
was
was 12%
12% in
in 2006
2006 declined
declined to
to 11,5%
11,5% in
in 2007
2007
while
while share
share of
of portfolio
portfolio investments
investments and
and shortshort-
Bank
loans 1
60
term
term capital
capital to
to GNP
GNP declined
declined from
from 3,6%
3,6% to
to 0,8%
0,8%
Foreign
direct
investments
40
in
in the
the same
same period.
period.
3
20
0
2000
2003
2004
2005
2006
2007
1 Bank loans: Net short-term and long-term loans borrowed by the banking sector from
abroad.
2 Non-bank sector loans : Net short-term and long-term loans borrowed by the nonbank sector from abroad.
3 Foreign direct investment: Foreign direct investment inflows.
4 Portfolio investments: Government bonds, Treasury bills and stock purchases of
non-residents.
Source: CBT
23
Foreign Exchange Reserves
Ratio of FX Reserves to GDP in 2007 in
Countries Implementing Floating Exchange
Rate Regimes*
Foreign Exchange Reserves
(Excluding gold, billion USD)
80
20
71.3
18,7
70
58.3
60
48.3
50
16
40
33.7
30
18
36.0
15,0
27.0
14
20
10
12
Average of Countries Implementing
Floating Exchange Rate Regime
0
2002
Source: CBT
2003
2004
2005
2006
2007
Turkey
* Countries included in the calculation: Argentina, Brazil, Czech Republic, Indonesia,
Philippines, South Africa, South Korea, Croatia, India, Kazakhstan, Colombia, Mexico,
Paraguay, Peru, Poland, Romania, Russia, Chile, Thailand, Uruguay
24
Balance of Payments
Why
Why Current
Current Account
Account Deficit?
Deficit?
Domestic
Domestic savings
savings below
below investments
investments
-- Deficit
Deficit is
is driven
driven and
and financed
financed by
by the
the private
private sector.
sector.
-- Social
Social security
security and
and energy
energy sector
sector reforms
reforms will
will improve
improve savings.
savings.
‘Sustainability’
‘Sustainability’ and
and ‘adjustment
‘adjustment capacity’
capacity’ are
are two
two main
main issues
issues
-- Private
Private sector
sector is
is relatively
relatively better
better placed
placed both
both to
to sustain
sustain and
and adjust
adjust ifif necessary.
necessary.
-- Improvements
Improvements in
in investment
investment climate
climate and
and labor
labor market
market reforms
reforms will
will be
be helpful.
helpful.
25
DISINFLATION AND BALANCE
OF PAYMENTS IN THE TURKISH
ECONOMY
Erdem Başçı
Deputy Governor
Central Bank of Turkey
March 4, 2008
26