Turkey needs more reforms to boost growth, says deputy PM

By Ece Toksabay and Ercan Gurses

ANKARA (Reuters) - Turkey needs to implement further economic reforms to set it on a path of higher growth and aims to drive up household and corporate savings, Deputy Prime Minister Mehmet Simsek said on Thursday.

Simsek, who has oversight for the economy, has previously said Turkey would not achieve its goal of 4.5 percent growth this year, although like others ministers he has been playing down the impact on output from a failed coup in July.

Economists say the government needs to speed up reforms to boost productivity in education, labor, governance and taxation. They also say savings need to rise to shift the reliance for growth on consumption.

"We need to show an effort for more reforms to place Turkey on a high growth path," Simsek told a business conference. "With very strong incentives, household savings will increase, and the reforms will encourage corporate savings as well."

He did not detail specific policy measures, but said research and innovation would lift output. He also said the government would "keep it tight" and avoid any unnecessary budget spending.

Weighing on the outlook, Turkish industrial production fell a calendar-adjusted 4.9 percent year-on-year in July, the Turkish Statistics Institute.

Turkey's Finansbank said this was bigger than the 3 percent fall it had predicted, while BGC partners said it was broadly in line with its forecast.

However, BGC said the coup had knocked the economy. "It is clear that 15 July failed coup attempt had a serious impact on production," its chief economist Ozgur Altug wrote in a note.

In a move announced by the government in the Official Gazette on Thursday, VAT charged on sales of new homes of more than 150 sq meters was reduced to 8 percent from 18 percent.

"The new incentive on house ownership is an important opportunity for those who want to buy a house. The government will show strong support," he said.

Turkey needs more foreign investment to plug a current account deficit that was about 4.5 percent of gross domestic product in 2015 and finance its heavily indebted companies. Investors want savings reforms and labor market liberalization.

In the markets, the lira stood at 2.9370 at 05:57 a.m. EDT, little changed from 2.9317 at the end of Wednesday. The main share index <.XU100> was up 0.6 percent at 78,108.84 points.

(Writing by Edmund Blair; Editing by Nick Tattersall)

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