KUALA LUMPUR, Sept 19 (Bernama) -- Fiscal or monetary expansion is not an alternative to structural reforms, Turkey Deputy Prime Minister Ali Babacan said today.

He said the expansion must be accompanied by a medium-term credible programme for normalisation.

"We cannot continue with the excessive balance sheet of central banks forever and with an excessive budget deficit.

"If there is a short-term implementation of the expansion, it should be accompanied with medium-term consolidation programme and a clear exit strategy," he said in his public lecture on the second day of the Global Islamic Finance Forum (GIFF).

Babacan, who also oversees economic and financial affairs in Turkey, said many countries needed structural reforms in social security, labour markets and improve investments.

He also cited how Turkey has been successful in implementing a three-year fiscal consolidation programme while some European nations were experiencing budget deficit at that time.

Babacan said central banks, especially the European Central Bank, which come up with many stimulus programmes and the US Federal Reserve coming up with quantitative easing exercise should be seen as constant opportunities to move forward for these countries.

"In such an integrated economic and financial framework of the world today, no country is immunised to any serious development in the global economy," he said.

Babacan also raised concerns over next year's outlook especially related to the US economy.

"2012 is a test year for Europe while 2013 will likely be a test year for the US. After the (presidential) election (in November), whoever steps in has to make some difficult choices.

"Like how to deal with the difficult cliff, how to deal with debt ceiling and how to come up with credible medium-term programmes to deal with the fiscal strategy," he said.

Countries also need to monitor the progress of emerging economies like China and India, which have been sending strong signals of slowdown over the last few months, he added.