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46 I Southeast Europe bne May 2018
Turkey’s economy is growing at “wrap speed” say analysts
Turkey grew 7.4% in 2017: analysts warn of blowout dangers in “warp-speed” expansion
Will Conroy in Prague and Akin Nazli in Belgrade
Fears that Turkey’s economy is overheating intensified on March 29 as 4Q GDP growth for last year came in at 7.3% y/y with the full-year 2017 expansion given as 7.4% after 3Q GDP was revised up 0.2pp to 11.3%.
Coming alongside high inflation, gauged as running at 10.26% y/y in February, the growth figures “will heighten fears that the economy is overheating,” William Jackson, senior emerging markets economist at Capital Economics, said.
“Picture this as the Starship Turkish Enterprise currently growing at warp speed,” commented Timothy Ash, senior emerging markets sovereign strategist at BlueBay Asset Manage- ment. The thrusters had been put on to get through a bit of turbulence – namely the downturn that followed the attempted coup in July 2016 – and Ash said he would “question whether
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the thrusters are going to overheat and blow out before the destination (early elections) is reached”.
With Turkey having become the fastest- growing G20 nation, recording its big- gest annual expansion in output since 2013, Ash added in a note to inves- tors: “I guess most economists would question how sustainable this pace of growth is given the widening current account deficit (5.5% of GDP), double digit inflation (10.3% and double the central bank target) and the large exter-
Jackson further observed: “While the headline rate of growth is itself alarm- ing, the breakdown also suggests that growth is increasingly unbalanced. In particular, strong domestic demand is leaking into imports, which expanded at their fastest pace since 2011. Exter- nal vulnerabilities are rising.”
The Turkish lira (TRY) stood at TRY3.9701 to the dollar at around 1500 Istanbul time on March 29, strengthening from around the TRY4.0 level seen in early trading. Jackson estimated that it would
"Picture this as the Starship Turkish Enterprise currently growing at warp speed”
nal financing gap ($220bn or 25% of GDP and double the FX reserves). Add in all the domestic political and then geopolitical concerns.”
probably have to reach around the TRY4.25 level to trigger a rate hike from the central bank. The currency lately touched a record low of 4.0375. It has