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growth rate, with short-term stimulus gains risk being more than offset by durable losses in trend growth.
“The expansion of government-controlled and subsidised funding is also not included in formal fiscal reports or in official fiscal plans, nor are most other off-budget liabilities such as expanding government guarantees to public-private partnerships. Even though detailed data are lacking, it is clear that public contingent liabilities have increased massively over the past year.”
Turkey’s monetary policy has benefitted from the very benign global monetary conditions with the policy interest rate sharply cut from 24% in July to 14% in October, the note said, adding: “At 8.6% in October, the annual inflation rate remains, however, well above the 5% target and is subject to upward risks in the period ahead as a result of sharp administrative price increases. A tight monetary stance should be maintained to ensure the continuation of the disinflation process. Ensuring the independence of the central bank is key for future credibility.”
The recovery in Turkey will be gradual and is vulnerable to substantial risks, the OECD concluded.
“GDP growth is expected to remain steady at around 3% in 2020 and 2021. Private consumption is projected to recover but investments should improve only very gradually. Weak export demand and impaired private balance sheets will continue to weigh on the recovery. Additional risks arise from geopolitical uncertainties, which, if not appeased, may erode confidence and increase volatility. In contrast, credible policy improvements in fiscal, financial and monetary policy areas may accelerate the recovery by upholding domestic and international investor commitment,” it said.
EBRD's transition scores for sustainable market economy qualities show fall in Turkey's financial resilience. The European Bank of Reconstruction (EBRD) on November 19 released its 2019 “Transition scores for six qualities of a sustainable market economy” and its latest overall “Transition Report 2019-2020” for the 37 economies it invests in.
The transition scores range from 1 to 10, where 10 represents a synthetic frontier corresponding to the standards of a sustainable market economy.
For Turkey, the scores were given as Competitive – 5.42 in 2019, 5.19 in 2018;
25 TURKEY Country Report December 2019 www.intellinews.com
