Page 47 - bne_Magazine_May_2018_print

bne May 2018 Southeast Europe I 47
fallen around 5% against the dollar this year, making it one of the worst per- forming emerging market currencies.
Growth momentum in Turkey appears to still be strong, Jackson noted, saying: “Indicators for the start of this year sug-
Ermut, president of the official Invest- ment Support and Promotion Agency of Turkey, in which he said that the robust growth continued to be a "magnet" for foreign direct investment. "Pro-business and reform-oriented policies have been a key driver of economic growth in Tur-
tion and the sinking Turkish lira since last year. Since the beginning of 2018, overheating concerns have also been weighing on estimates of the Turkish economy’s likely future performance.
The Turkish government is target- ing annual GDP growth of 5% for the years running from 2017 to 2020.
Earlier this month, the OECD raised its forecast for Turkish GDP in 2018 by 0.4pp, upgrading the forecast to 5.3%.
Last month, Moody’s Investor Services raised its growth forecasts for Turkey
to 4% in 2018 and 3.5% in 2019, from 3.2% and 3.3%, respectively. However, on March 8, it cut Turkey’s sovereign credit rating further into junk, saying that the Turkish government – which has followed a strategy of injecting huge stimulus into the economy since the downturn that followed the attempted putsch – seems focused on short-term measures, undermining effective mon- etary policy and economic reform.
Turkey’s parliamentary and presidential elections – after which the country will switch to an executive presidency with the post of prime minister abolished – are scheduled for November 2019, but there is a substantial amount of specula- tion that Turkish President Recep Tayyip Erdogan will go for earlier elections, which may even be held this year, in an attempt at coinciding with a time when the economy is still humming.
"The recovery of the Turkish economy is very much debt-fuelled”
gest that growth has remained strong. Industrial production expanded by 12.9% y/y in January, up from 10.6% y/y in December. And while the manu- facturing PMI edged down last month, it stayed close to a seven-year high.”
"Spectacular"
Turkish economy minister Nihat Zeybek- ci reacted to the latest growth figures by saying they were a “spectacular achieve- ment” and that all the indications are that growth will be strong in 2018 too. The economy is creating investments, exports and jobs and is growing in a balanced fashion, he said. Turkey, now essentially in the same growth strato- sphere as India and China, has a faster growing economy than any European state and things could stay that way for at least the next decade, Zeybekci said.
The Turkish economy achieved growth of 3.2% in 2016 and 6.1% in 2015. Markets had expected 2017 growth of 7.25% compared to the 7.4% officially announced, according to a Reuters poll of economists.
Looking further at the current account deficit – making Turkey vulnerable to external shocks as it relies on foreign capital inflows to finance the gap – Ash pointed to the Turkish economy’s “big
net export drag, with exports up 9.3% and imports up 22.7% y/y which kind
of shows the problems on the current account”. He added: “The annual data on the latter score is a bit better with exports up 12% and imports 10.3%, but there was a really marked deterioration from Q1 2017 onwards which is worrying”.
key and the government is committed to continue these policies," Ermut added.
Despite the severe devaluation of the TRY in 2017, given the robust pace of nominal GDP growth last year (19%), Turkish GDP in USD only dropped from $863bn in 2016 to $853bn in 2017. Private consumption rose by 6.1% y/y in 2017, higher than the 3.7% recorded in 2016.
On the production side, the construction industry grew 8.9% y/y in 2017, outpacing the 5.4% annual growth achieved in 2016. Industrial production also rose by 9.2% y/y, higher than the 4.2% posted for 2016.
The recovery of the Turkish economy
is very much debt-fuelled. A substan- tial aspect of that has been the state’s TRY250bn (€63bn) credit guarantee fund (CGF) for backstopping bank loans to businesses.
The markets have grown increasingly worried about the double-digit infla-
Turkey's GDP Growth
Reuters quoted a statement from Arda
www.bne.eu