Imf Chief Economist: Drop In Oil Prices Will Stimulate Turkish Economy

- Olivier Blanchard, Chief Economist at the International Monetary Fund (IMF) told the monthly publication of Turkey’s Borsa Istanbul Magazine that even though the dollar gaining strength against the euro was an undesirable development, this effect remained reasonable against the drop in other goods prices and the effect generated by the oil price shock.

Blanchard suggested that considering Turkey mostly uses Euro or US Dollars in its import activities, the drop in oil prices could help Turkey’s economy, by stimulating growth, and serving to reduce inflation and current deficit.

“In 2015, we are expecting a growth rate of circa 3.4 percent and a drop in inflation down to 6.2 percent, as well as a reduction in inflation of food prices. There is a possibility that the current deficit will register a sharp drop down to the 3.8 percent of GDP, reducing the need for external financing” added Blanchard.

Regarding the course of changes in oil prices and its impact on economy, Blanchard urged to exercise precaution, on the other hand, consider the various remarks predicting prices would remain low for a further period of time.

“When we try to see the clear picture, we can say that the price drop is a desirable situation for the world economy. Large countries that are all oil importers continue to work below their potential. They will draw support from cheap oil” added Blanchard.

The Q&A of the magazine also addressed Blanchard’s projection that “Istanbul was already an international center of finance, and that clear and predictable regulations needed to be put in place to help the city develop as a financial center”.

“Becoming a successful international center of finance requires proximity to commercial centers, a network with strong global connections to service providers (legal, accounting, logistics, etc), the co-presence of the right skills, an efficient technological infrastructure for capital markets as well as clear and predictable regulations in place” said Blanchard.

Having highlighted Turkey already had much of what it needs due to its strategic location between the East and West, and its wide commercial networks with both of the regions, Blanchard added:

“Istanbul in particular is already an international center of commerce, and some of the leading banks hold an important place in Istanbul. It is important to have clear and predictable regulations in place for the development of a financial center.”