Turkey May Make Further Tax Cuts

Turkey may make further temporary tax reductions to try to boost flagging growth after a disappointing third quarter, in addition to its efforts to expand credit and bolster domestic demand, Finance Minister Naci Agbal told Reuters.

Turkey’s economy has been hit by a failed military coup in July and uncertainty about the emergency rule imposed in its wake, which has made both investors and consumers cut back on spending. Ankara’s deepening involvement in the conflicts in neighboring Syria and Iraq has added to the concerns.

Industrial production shrank 3.1% year-on-year in September, prompting economists to cut their growth forecasts and making the government’s target of 3.2% growth in 2016 look extremely difficult to achieve.

“We are aware of the problem. The economy is slowing ... the third quarter numbers did not come in well,” Agbal said in an interview in his office late on Nov. 10, declining to say whether the official growth target would be changed.

“The government is trying to use all possible instruments, including monetary policy, including macro-prudential measures and fiscal policy measures, and we will continue to take any additional measures in order to give the economy some impetus.”

Prime Minister Binali Yildirim met the heads of Turkey’s biggest banks this month to urge them to lower their interest rates. The central bank has meanwhile cut policy rates at seven of its last eight meetings despite weakness in the lira currency, which has hit a series of record lows in recent weeks.

“At the ministry of finance, we are working on some tax measures, temporary tax reductions if possible, but at the same time we have to take into account fiscal discipline,” Agbal said, without giving further details.