Bloomberg News

Babacan Says Turkey ‘Serious’ on Loan Curbs, Current Account

June 07, 2011

(Updates with comments on budget starting in first paragraph.)

June 7 (Bloomberg) -- Turkey is “serious” about curbing credit growth and the current-account gap and will use the budget and possibly sanctions on individual banks to ensure its goals are met, Deputy Prime Minister Ali Babacan said.

Turkey aims to produce revised budget targets before September that will be framed with the central goal of ensuring the current-account deficit remains sustainable, Babacan said in an interview in Ankara with Bloomberg HT television today.

Turkey’s credit rating may come under pressure if it has difficulty financing the current-account gap, Moody’s Investors Service said yesterday, urging the government to tighten the budget after this week’s parliamentary elections. The deficit, forecast by the government to widen this year to $39.3 billion, or 5.4 percent of gross domestic product, reached $60.5 billion in the 12 months through March as economic expansion boosted demand for oil, gas and imported consumer goods.

Babacan said financial authorities will ensure that bank lending expands by no more than 25 percent this year to rein in domestic demand. The Banking Regulation and Supervision Agency will become more active and may consider steps against individual lenders and make use of new instruments, he said.

The government expects to exceed its revenue targets as faster-than-forecast growth and a tax amnesty draw in income, Babacan said. The plans may include spending cuts and will treat tax increases as a “last option” because they can accelerate inflation, he said.

Moody’s rates Turkish credit Ba2 with a positive outlook. Ba2 is the risk-assessor’s second-highest non-investment grade. Standard & Poor’s rates the country an equivalent BB, also with a positive outlook, and Fitch Ratings ranks Turkey as BB+, one notch below investment grade.

--Editors: Heather Langan, Jennifer M. Freedman

To contact the reporter on this story: Steve Bryant in Ankara at sbryant5@bloomberg.net.

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net.


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