Türkiye’s removal from financial watchdog's grey list is good news: OECD chief economist
Financial Action Task Force’s decision to remove Türkiye from grey list to improve international markets’ confidence, foreign direct investment
By Nuran Erkul
LONDON (AA) - Türkiye’s removal from the grey list by the Financial Action Task Force (FATF) is a step towards further boosting international markets’ confidence in the country, Alvaro Pereira, chief economist of the Organization for Economic Co-operation and Development (OECD), told Anadolu.
Hailing the FATF’s decision as “good news,” Pereira stated that it confirms that Türkiye has solidified and realized its anti-money laundering efforts to meet international commitments.
“Türkiye’s CDS has been declining, credit agencies have upgraded Türkiye's credit rating, and in June, net international reserves, excluding swaps, turned positive for the first time since early 2020,” said Pereira, noting that the country’s removal from the grey list is only “a step to significantly improve FDI (foreign direct investment) inflows.”
Pereira highlighted that significant economic challenges have yet 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 improving 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 inflows,” he said.
- Türkiye’s fiscal consolidation efforts ‘crucial for putting economy on sustainable path’
Pereira stated that monetary policy conditions should remain “tight,” as the current rate of inflation requires fiscal prudence until it is “firmly on a path to the target.”
He noted that the fiscal consolidation efforts of Türkiye’s new economic administration have been “crucial for putting economy on a sustainable path.”
Pereira highlighted that Türkiye’s Central Bank’s determination to tighten monetary policy when necessary until the inflation outlook sees a significant improvement has been satisfactory.
“Structural reforms can support current efforts to stabilize the macroeconomic framework and raise potential growth in the long term, notably, labor market reforms could facilitate higher-quality formal job creation,” he said.
- Exports are expected to gradually strengthen
Pereira stated that the OECD expects Türkiye’s GDP to grow by 3.4% in 2024, and by 3.2% in 2025.
He noted that the country’s restrictive monetary policy and inflation will keep private consumption moderate, while the cooling in the labor market is expected as growth eases.
He said that the investment activity in Türkiye is expected to remain strong due to the reconstruction efforts after the 2023 earthquakes in the country’s southeast.
“Exports are expected to gradually strengthen, reflecting an improved external environment,” he added.
- Removal from grey list
The FATF held its June meeting last week under its Singaporean presidency and decided to remove Türkiye from the grey list after addressing deficiencies identified during previous assessments on anti-money laundering and combating the financing of terrorism (AML/CFT).
Mohamed Daoud, industry practice lead at Moody’s rating agency, stated that Türkiye’s removal from the grey list indicates that significant progress has been made by the government and various economic sectors to strengthen the fight against money laundering and the financing of terrorism.
“This development is expected to boost Turkey’s reputation internationally, potentially boosting foreign investment and relationships with European and US institutions,” said Daoud.
*Writing by Emir Yildirim in Istanbul
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