EBRD cuts 2014 growth forecast for Turkey to 2.5%.

By bne IntelliNews May 14, 2014

The EBRD has slashed its 2014 GDP growth forecast for Turkey to 2.5% from a previous 3.3%.

The higher cost of finance, alongside the introduction of legislation curtailing credit card spending, is expected to constrain private consumption and investment activity, and weigh on growth in 2014, according to the EBRD’s latest Regional Economic Prospects-May report. The EBRD expects growth to recover somewhat in 2015 to 3.2% on the back of favourable base effect, opening up the space for monetary easing, and somewhat elevated business and consumer confidence resulting in higher contribution of consumption and investment.

The major downside risk is that Fed’s tapering weighs on the flow of foreign funds to the emerging markets more than expected, where Turkey might take the brunt of the drain in short term capital flows, with its still large external imbalances mainly financed through this channel, the EBRD said. But on a positive side, the EBRD added, the economy proved resilient to unfavourable circumstances in 2013, with still positive net portfolio inflows, and continuing access to international markets for both public and private sectors, albeit with higher interest rates.

The EBRD does not expect large impact of the Russia/Ukraine crisis on growth outlook in Turkey, but it still warns that a further deepening of the crisis, especially if it pushes up the price of oil, would pose a downside risk. The inflationary pressures will likely keep interest rates, and thus the cost of finance, high throughout 2014, according to the EBRD.

GDP Growth Projections for Turkey    
(%) 2014 2015
EBRD (May 2014) 2,5 3,2
European Commission (May 2014) 2,6 3,3
Turkish Government (Medium Term Programme) 4 4
IMF (April 2014) 2,3 3,1
Turkish Central Bank survey (April 2014) 2,7 3,7
World Bank (Jan 2014) 3,5 3,9
OECD (May 2014) 2,8 4
Source: ebrd, ec, dpt, imf, tcmb, oecd, world bank    

Related Articles

Turkey to refuse extradition of all suspects to US unless Washington hands over Gulen says Erdogan

Turkey will not extradite any terror suspects to the US if Washington continues to refuse to hand over Fethullah Gulen, President Recep Tayyip Erdogan said on January 11. Ankara blames the ... more

Turkey rebukes Arab nations for feeble response to Trump’s Jerusalem move ahead of Muslim summit in Istanbul

Turkey has chided what it sees as a feeble Arab reaction to Donald Trump’s decision to reverse decades of US foreign policy by recognising Jerusalem as Israel’s capital. Speaking on December ... more

Russia said to offer Turkey partial financing for S-400 anti-aircraft missile system purchase

Russia is to offer Turkey partial financing for Ankara’s acquisition of S-400 surface-to-air missile systems, Interfax news agency quoted a Russian presidential aide as saying on December 12. ... more

Dismiss