News
Turkey’s removal from financial watchdog’s grey list is good news: OECD chief economist
LONDON
Turkey’s removal from the Financial Action Task Force’s (FATF) grey list is a step to further boost international markets’ confidence in the country, Alvaro Pereira, chief economist at the Organization for Economic Cooperation and Development (OECD), told Anadolu.
Welcoming the FATF decision as “good news”, Pereira said it confirms that Türkiye has solidified and implemented its anti-money laundering efforts to meet international commitments.
“Turkey’s CDS is declining, credit agencies have upgraded Turkey’s credit rating, and in June, net international reserves excluding swaps turned positive for the first time since early 2020,” Pereira said, noting that the country’s removal from the grey list is just “a step towards significantly improving FDI (foreign direct investment) inflows.”
Pereira highlighted that significant economic challenges still need to be overcome despite positive developments in recent months, as inflation is still “stubbornly high” and the increase in FDI inflows remains limited.
“To fully benefit from the improved international sentiment, authorities should continue with macroeconomic stabilization policies, as a stable and predictable policy framework, coupled with a stable macroeconomic environment, has the potential to significantly boost international investment flows,” he said.
Turkey’s fiscal consolidation efforts are “crucial to putting the economy on a sustainable path”
Pereira said monetary policy conditions should remain “tight” as the current rate of inflation requires fiscal prudence until it is “firmly on track towards the target”.
He noted that the fiscal consolidation efforts of Turkey’s new economic administration were “crucial in putting the economy on a sustainable path.”
Pereira highlighted that the Central Bank of Turkey’s determination to tighten monetary policy when necessary until the inflation outlook shows a significant improvement has been satisfactory.
“Structural reforms can support ongoing efforts to stabilize the macroeconomic framework and raise potential growth in the long term. Notably, labor market reforms can facilitate the creation of higher-quality formal jobs,” he said.
Exports are expected to gradually strengthen
Pereira said the OECD expects Turkey’s GDP to grow by 3.4% in 2024 and 3.2% in 2025.
He noted that the country’s tight monetary policy and inflation will keep private consumption subdued, while a cooling labor market is expected as growth slows.
He said investment activity in Turkey is expected to remain strong due to reconstruction efforts following the 2023 earthquakes in the country’s southeast.
“Exports are expected to gradually strengthen, reflecting an improved external environment,” he added.
Greylisting Removal
The FATF held its June meeting last week under its Singapore chairmanship and decided to remove Türkiye from the grey list after addressing deficiencies identified during previous anti-money laundering and combating the financing of terrorism (AML/CFT) assessments.
Mohamed Daoud, industry practice leader at ratings agency Moody’s, said Turkey’s removal from the grey list indicates that the government and various economic sectors have made significant progress in strengthening the fight against money laundering and terrorist financing.
“This development is expected to boost Turkey’s reputation internationally, potentially boosting foreign investment and relationships with European and American institutions,” Daoud said.
*Written by Emir Yildirim