Turkey should not raise interest rates: Business body

ISTANBUL

Turkey should not raise its interest rates, head of the Independent Industrialists' and Businessmen's Association (Musiad) said on Monday.

Speaking to Anadolu Agency's Finance Desk in Istanbul, Abdurrahman Kaan described Central Bank's last decision on interest rates as “correct”, saying an increase would not have suppressed currency rates.

"If we bring inflation under control, we can manage to control currency rates; we need to raise production to balance the currency rate," Kaan said.

Turkey needs to decrease real interest rates to pave the way for investments since current interest rates pose a problem for investments and loans, he said.

Some actors use currency rates to raise interest rates but the Central Bank recognized that raising currency rates is not a problem for Turkey's economy, he added.

The Central Bank has kept its one-week repo rate -- also known as the bank's policy rate -- constant at 17.75 percent.

The business community wants a partnership based on an economic model instead of it being loan-based, Kaan said, adding: "Banks can use 10 percent of their deposits in several sectors such as construction, energy, agriculture or food."

He also said Turkey needs to simplify its taxation system; the business community wants to act in a simple taxation system as much as possible.

About talk of a global trade war, Kaan said: "Turkey will not be affected by President Donald Trump's attitude and the new system because Turkey takes little share from global capital flows.

"The trade war may even benefit Turkey because international institutions and companies invest in more countries that offer good logistics opportunities, we expect movement, especially from China to Turkey."

Turkey needs diversity and requires good relations with everyone, including the EU, the U.S., and China, he said.

"We do not need tensions, the world is big enough, there are sufficient resources.”

Mentioning the 10th BRICS summit last week, he underlined that inviting President Recep Tayyip Erdogan to the summit was good for business. Erdogan said in the summit that Turkey wants to develop its cooperation with BRICS countries – Brazil, Russia, India, China, South Africa -- in the field of economy, investment and development areas.

If Turkey joins BRICS it will strengthen Turkey, Kaan added.