Turkey loosens belt in 2008 budget

@T=ANKARA (AFP) -- The Turkish government cut its primary budget surplus target for 2008 by one percentage point, Finance Minister Kemal Unakitan said Thursday, in a sign of relaxing monetary policy following a strong economic recovery.
The draft budget for next year, submitted to Parliament overnight, sets the target of primary budget surplus -- surplus excluding debt repayments -- at 5.5 percent of the gross national product (GNP), compared to 6.5 percent over the past five years.
The revised figure does not mean that Turkey is loosening fiscal discipline, but that strong economic performance allows for the cut, Unakitan told a press conference.
Turkey has recorded strong growth, sped up privatization and attracted record foreign investment since 2002, significantly improving its debt ratios.
""Turkey has ensured sustainable growth and economic stability,"" Unakitan said. ""Turkey is not deviating from the principles"" of fiscal discipline.
He promised continued structural reform, saying: ""There is no alternative to this.""
Turkey has implemented tight IMF-sponsored recovery programs since 2001, when a severe financial crisis plunged the economy into a recession.
The current three-year, 10-billion-dollar stand-by deal with the International Monetary Fund expires next year.
""The IMF will not be very happy (with the lowered target), but I do not think they will make a big issue out of it,"" said Tolga Ediz, a senior economist at Lehman Brothers.
Other analysts said structural reform, particularly in the troubled social security system, would be more important than the impact of increased expenditure.
Ankara is expected to miss its 6.5-percent primary budget surplus target this year, obtaining about 4.3 percent, Economy Minister Mehmet Simsek said.
Draft budget
The 2008 draft budget foresees expenditure of 222.3 billion lira (185.5 billion dollars, 130.2 billion euros) and revenues of 204.6 billion lira (170 billion dollars, 119.3 billion euros), which represent increases of 9.6 and 8.8 percent respectively from the year-end projections for 2007.
The deficit target is set at 17.8 billion lira (14.7 billion dollars, 10.3 billion euros).
The draft projects GNP in 2008 of 716.6 billion lira (595.2 billion dollars, 417.6 billion euros), growth at 5.5 percent and sets the inflation target at four percent.
Pay increases averaging 7.6 percent are foreseen for public employees, and the per capita income is projected to reach 7,000 dollars (4,911 euros) from the 6,625 dollars (4,648 euros) expected this year.
Between 2002 and 2006, inflation in Turkey fell from 29.7 to 9.65 percent and public debt dropped from 78 percent of GNP to 45 percent.
Growth averaged 7.0 percent over the past four years, and direct foreign investment hit a record 20 billion dollars in 2006 alone.