IMF Advises Turkey To Tighten Monetary Policy

(RTTNews) - The International Monetary Fund advised Turkey to tighten monetary policy to address sharp lira depreciation, contain high inflation, and counteract intensifying external pressures.

Concluding the 2017 Article IV Consultation with Turkey, the IMF said the economy is set to grow below potential in 2016-18.

The lender projected gross domestic product to grow 2.7 percent in 2016 and 2.9 percent in 2017 with considerable downward risks.

Over the medium-term, growth is projected to be at around 3.5 percent, unchanged from previous estimates, but internal and external imbalances are expected to persist, the IMF said.

According to IMF, domestic political turmoil, uncertain future of the EU-Turkey relations, tensions in the South-east regions, coupled with military involvement in neighboring countries are set to weigh on domestic demand.

The IMF noted that political uncertainty after the failed coup attempt and a less favorable external environment are weakening the Lira and increasing the cost of external financing.

IMF welcomed the authorities' measure to simplify the monetary policy framework. IMF directors also recommended the authorities re-building international reserve buffers as conditions permit. Further, the lender encouraged the authorities to intensify the pace of structural reforms to promote economic rebalancing and boost productivity.