World Bank Lowers 2014 GDP Growth Estimate for Turkey to 3.1 Percent, Maintains 2015 Forecast

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The FINANCIAL — A weak Q3 GDP print means end-year growth is likely to come in just above 3 percent. However the disappointing headline number is mainly due to a reduction in inventories with other components of domestic demand signaling improvements, according to the World Bank’s Turkey Regular Economic Brief No: 5- issued in Ankara. Moreover, the outlook for inflation and the current account has improved substantially due to a sharp decline in oil prices. The World Bank’s 2015 growth projection remains unchanged at 3.5 percent, according to the World Bank Group.

“Thanks to lower oil prices, Turkey will achieve significant external rebalancing in 2015 with the current account projected at 4.5 percent of GDP and inflation coming down to 6.7 percent.” said Senior Economist Kamer Karakurum Özdemir. However, the brief cautions that renewed weakness in the currency shows, once again, that Turkey is vulnerable to a change in investor sentiment and that the room for monetary policy maneuver is consequently limited. While private consumption is expected to return to being the main driver of growth, political uncertainty and the volatility in global markets will continue to weigh on investor sentiment.

“Turkey’s growth prospects beyond 2015 depend on the recovery of private investment and a resumption of productivity growth. For this, a signal of the Government’s commitment to a level playing field for all investors is needed. The new 25 Transformation Programs provide such an opportunity, but moving beyond announcements to implementation will be critical,” said Martin Raiser, Country Director for Turkey.

Against this background, the World Bank in 2014 has supported projects to enhance Turkey’s competitiveness including a Development Policy Loan supporting key reforms in capital and labor markets; additional financing to BOTAŞ for the completion of the Tuz Gölü Gas Storage Facility; and further financial support for Turkish SMEs focused on innovative instruments such as Islamic financing and factoring, according to the World Bank Group.

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