EBRD DOUBLES 2017 ECONOMIC GROWTH FORECAST FOR TURKEY
The European Bank for Reconstruction and Development (EBRD) has upgraded its 2017 growth forecast for Turkey by 2.6 percentage points. In its latest forecast Regional Economic Prospects, published on Nov. 7, the EBRD projects that the Turkish economy will grow by 5.1% in 2017 and
3.5% in 2018. “Growth in Turkey is projected to accelerate to 5.1% in 2017 on the back of government stimulus before moderating to 3.5% in 2018 as the impact of the fiscal stimulus wears out,” the report said.
Turkey’s economy grew 5.2% in the first quarter of this year and 5.1% in the second quarter, compared with the same periods in 2016, according to the Turkish Statistical Institute (TurkStat). The government’s significant fiscal stimulus this year
-- I notably the temporary VAT cuts for durable consumer goods and the TRY 250 billion ($70 billion) Credit Guarantee Fund -- led to a surge in domestic demand in 2017, the report said.
The report noted the lira’s recovery of some of its losses, reflecting both Central Bank of
Turkey measures to tighten monetary policy and increased portfolio inflows in common with the overall trend in emerging markets. “However, Turkey’s large current account deficit, extensive foreign-exchange-denominated corporate debt and investor concerns over geopolitical risks mean that the lira remains vulnerable,” the report said.
It also said strong public finances and a stable banking system remain the key anchors of the Turkish economy, despite the recent loosening of fiscal policies and rising contingent liabilities. “The banking system remains well capitalized, with low levels of non-performing loans (3.1%),” the report said. “A significant strength of Turkey is its low public debt of 28% of GDP at end-2016 and low budget deficit, which stood at 1.1% of GDP in 2016. However, expansionary fiscal policies adopted since the end of 2016 have rapidly expanded the budget deficit and the government passed an act to increase the borrowing limits of the Treasury this year.”