Istanbul, Turkey: the country’s economy has grown remarkably over the last ten years (photo: Newscom)
TURKEY'S ECONOMY
The trip to Turkey is part of a series of visits to the IMF's member countries by Lagarde, including other key emerging economies such as Brazil, China, India, Russia and South Africa.
As one of the largest emerging economies, Turkey is gaining representation and voice in the IMF and in the Group of Twenty advanced and emerging economies.
“Turkey has had a remarkable period of growth over the last ten years, more than doubling per capita income and reducing poverty," said Lagarde. "However, vulnerabilities are arising as a result of the large current account deficit financed by short-term capital flows."
"This is why it is important that Turkey should continue to implement a sound combination of macroeconomic, fiscal, and structural reforms to sustain stability and growth into the future."
Slow and steady wins the race
Lagarde said that after two years of fast growth, which has increased the current account deficit and made the economy more vulnerable to changes in investors' risk appetite, the economy has now entered a period of more moderate growth.
Lagarde said the IMF expects Turkey’s economy to grow by 2.3 percent in 2012.
She noted that slower growth has benefits as this will help reduce inflation and the current account deficit, which at close to 10 percent of GDP, represents a vulnerability.
The short-term nature of the capital flows that have financed the country's low savings rate expose Turkey to the vagaries of international capital markets.
The IMF is projecting an improvement in Turkey's current account of about 1 percent of GDP for 2012, even after taking into account the higher energy prices expected for this year.
Increasing Turkey’s exports and foreign investment requires macroeconomic stability, said Lagarde. In addition, structural reforms are key. These include building a better business environment, labor market reforms, and an education system that is more responsive to the changing needs of the global market place.
Women's role in Turkey's economic development
In addition to meetings with government officials and investors, Lagarde met with a group of women leaders in business, academia, nongovernmental organizations, and the media in Turkey.
This is part of her ongoing efforts to seek out a diversity of views from a wide audience both across and within countries to better understand their different challenges and needs.
Women's participation in the development of their countries is key for economic and social advancement, Lagarde said. In particular, she said that Turkey would reap significant benefits by increasing women's participation in the labor force.
“There is a virtuous circle of women’s empowerment and development, and it’s just smart economics,” said Lagarde during a discussion with the Turkish women leaders in Istanbul.
