High Oil Prices not to Profoundly Affect Turkish Economy

By Economy News Desk, Istanbul
Published: Thursday, January 26, 2006

The increase of oil prices to $70 brought the potential negative impact on the Turkish economy to the agenda. Experts reported precautions are being implemented against the increase, while Turkish Economy Minister and European Union Top Negotiator Ali Babacan claimed the oil price increase will not leave deep impacts on the Turkish economy.

Babacan also said the price increase might slightly influence the current account deficit and inflation; however, "shocking absorbent mechanisms" have been realized in the system, and well established in their efficiency. Despite the increase of oil price from $20 to $70, the targets of the economy were not misguided up to now, and inflation continues to diminish. The rate of five percent determined by inflation targeting is average, even if it encounters "petty deviations".

The minister said the increased oil price in 2005 resulted in a one-point effect for the inflation target, which remained at 7.7 percent although the target was eight percent. Babacan, who traveled to Davos to attend the World Economy Forum meetings, shared his assessments with Turkish news channel NTV, "There is no need for a disaster scenario" because Turkey's shocks "could be absorbed" as the result of implementations.

"The economy's resistance against disaster was tested by the Iraqi crisis and terror activities. We have already considered that oil prices might increase in our estimations," Babacan asked the employment data announced to be evaluated by realizing "seasonality".