Limited capital flight from Turkey, says Babacan

ISTANBUL

Remarks by Fed Chairman Ben Bernanke on May 22 that US federal bank would slow down buying of bonds triggered a period that affects all developing countries, Turkish Deputy Prime Minister and minister responsible for the economy Ali Babacan said.

Speaking at the 4th Istanbul Finance Summit (IFS) in Istanbul's Ceylan Intercontinental Hotel, Babacan added that there has been a limited capital flight from Turkey since Bernanke's comments four months ago, which Babacan said was overwhelmingly interpreted as a revaluation of assets.

Turkish Deputy Prime Minister Ali Babacan said on Wednesday that quality not quantity is crucial for financial growth since.

Babacan stated that the world still suffers from the deep impacts of the financial sector crisis.

Noting that there have recently been only partial signs of recovery in the US after the global economic crisis, Babacan told the summit, "public debt stocks and the ratio of debt stocks resulted in this partial recovery."

Expressing that it remains unclear whether the partial recovery in the European Union (EU) is consistent or not, Babacan stressed that European countries such as Italy and Portugal are still struggling with problems like debt stocks which have "not reached the desired level yet."

"Thanks to the recent measures implemented by the European Central Bank, interest rates have dropped in many countries," he said in noting that market pressures diminished.

Babacan also mentioned the signals indicating growth in the Japanese economy.

Regardless of the scenario over the next 10 years, claimed Babacan, developing economies' share in the world economy will continue to increase.

"The world experiences far higher interest rates compared to the previous figures along with the ongoing increase in credit and deposit interests," he said

Reminding that it would be an error to be deceived by looking at today's liquidity plenitude, Babacan warned that Turkey should be highly cautious while implementing its own monetary policies.

Turkish Deputy Prime Minister alerted developing countries to quickly undertake the required reforms and to be careful with their social policies.

He described the 3 key elements of financial growth as being financial, social and environmental sustainability.

Babacan noted that Turkey preferred a scenario of financial growth based, not on consumption, but on private and state investments, with investment expenditures coming predominantly from the private sector, rather than the state.

He said they desired state expenditures to remain lower compared to that of the private sector.

Babacan noted he considers healthy growth to be based on foreign demand, not domestic demand.

(to be continued)

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