European Commission raises its 2015 GDP growth forecast for Turkey to 3.7%

By bne IntelliNews February 5, 2015

Based primarily on the oil price stimulus and easier monetary policy, Turkey’s output growth is expected to increase to 3.7% in 2015 and 4.0% in 2016 from an expected 2.8% in 2014, the European Commission said in its Winter Economic Forecast. The Commission’s forecasts for 2015 and 2016 were 3.3% and 3.7%, respectively, in the previous Autumn 2014 report.

Acknowledging potential risks from Europe, Deputy PM Ali Babacan said in January that the government did not consider revising its 4% GDP growth target for 2015.

Inflation is expected to decline significantly, growth will be boosted by the rise in consumers' purchasing power, and the reduced outlay for imported energy will narrow the current account deficit, according to the Commission.

One downside risk to this forecast is the possibility of a renewed sell-off in Turkish financial assets as US monetary policy normalises, said the Commission adding that this could require a tightening of Turkish monetary policy with negative repercussions for private domestic demand. According to the Commission, another risk is a worsening geo-political situation in the Middle East and in Russia/Ukraine. On the domestic side, private consumption expenditure is likely to recover from its recent sluggishness and private domestic demand will again become the main driver of growth, it concluded.

The Commission expects annual inflation rate to ease to 6.3% this year from 8.9% in 2014 and further decline to 5.8% in 2016.

Current Account Balance

Turkey's large current account deficit narrowed to an estimated 6.0% of GDP in 2014 much helped by lower imports of non-monetary gold and the recent oil price drop will reduce the deficit to below 4% of GDP in 2015, In 2016, the assumed firming of the oil price and continued strengthening of domestic demand should result in a modest widening of the current account deficit.

Public Finance

The Commission estimates the general government deficit to correspond to 1.5% of GDP in 2014 and projects it to decline slightly in the following two years in tune with firmer GDP growth and accelerating tax revenues.


Employment growth is expected to run somewhat below output growth, reflecting a reduced trend growth rate for labour productivity. Annual average unemployment in both 2015 and 2016 is projected at 10.5% of the labour force aged 15-64 years.

GDP Growth Projections for Turkey
(%) 2014 2015
EBRD (Sep 2014) 2.9 3.0
European Commission (Feb 2015) 2.8 3.7
Turkish Government - Medium Term Programme for 2015-2017 (Oct 2014) 3.3 4.0
IMF (Nov 2014) 3.0 3.0
Turkish Central Bank survey (Dec 2014) 3.0 3.5
World Bank (Jan 2015) 3.1 3.5
OECD (Nov 2014) 3.0 3.2
Fitch (Dec 2014) 3.0 3.3
S&P (Nov 2014) 2.9 3.0
Source: ebrd, ec, dpt, imf, tcmb, oecd, world bank, s&p

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