The Turkish economy will grow close to 4% this year as envisaged in the government’s medium-term programme, the Central Bank governor, Erdem Basci, said on Monday.
Exports will support growth while private final domestic demand will lose momentum, Basci told a meeting of industrialists.
A survey of expectations by the Central Bank in March put end-year GDP growth at 2.6%. The World Bank and IMF expect the Turkish economy to expand 3.5% this year. In January, the EBRD slashed its 2014 GDP growth forecast to 3.3% from a previous 3.6%. The European Commission’s growth forecast is at 2.5%. In April, Fitch cut its growth forecast to 2.5% from 3.2% for 2014.
Retail loan growth continues to slow down in response to the tight monetary policy stance, recent macroprudential measures, and weak capital flows, according to Basci who believes the rate of loan growth will soon ease to the Bank’s reference rate of 15%.
Basci reiterated the Bank’s previous comments that the impact of monetary tightening on inflation will be observed with some lag, thereby the decline in inflation is expected to begin after June and the current account deficit will improve substantially in 2014.
Basci also said on Monday that no large rate cut should be expected. Interest rates should be lowered gradually, and an interim monetary policy committee meeting is not necessary, Basci asserted. Last week PM Recep Tayyip Erdogan called on the Central Bank to cut interest rates. Markets positively reacted after the local elections, with the Stock Exchange rallying and yields falling on the back of the election results, Erdogan said, adding that the Central Bank should convene an emergency meeting to cut interest rates.
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