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It added: “The region is expected to grow at 1 percent in 2019 (0.2 percentage point higher than in the April WEO, buoyed by robust first quarter growth). Growth is expected to improve to 2.3 percent in 2020 (0.5 percentage point lower than in the April WEO, largely reflecting the projected growth slowdown for the remainder of 2019 in Turkey).” Turkey again got a mention as the update looked at the potential for “abrupt shifts in risk sentiment”, saying: “As discussed earlier, the increase in US-China trade tensions in May caused a rapid deterioration in global risk appetite. While sentiment improved in June, potential triggers for other such risk-off episodes abound, including further increases in trade tensions; protracted fiscal policy uncertainty and worsening debt dynamics in some high-debt countries; an intensification of the stress in large emerging markets currently in the midst of difficult macroeconomic adjustment processes (such as in Argentina and Turkey); or a sharper than-expected slowdown in China, which is dealing with multiple growth pressures from trade tensions and needed domestic regulatory strengthening. “A risk-off episode, depending on its severity, could expose financial vulnerabilities accumulated during years of low interest rates as highly leveraged borrowers find it difficult to roll over their debt and as capital flows retrench from emerging market and frontier economies.”
Central European economies decouple from Eurozone slowdown. Economists from wiiw have revised upwards their forecasts for Central and Southeast European economies as wage-driven growth has stopped them from following the Eurozone into a slowdown. Previously, analysts had been predicting a cooling off of growth in the Central and Southeast Europe region, caused by the global cooling of GDP growth, which has already been observed in the Eurozone. With many of the region’s economies closely linked to Eurozone countries — in particular Germany — as their main export markets, they were expected to follow. But while there has been a cooling down in some places, it is much less than wiiw expected in spring, leading to an upgrade of forecasts for this year, wiiw economists said in a webinar on July 4. For many countries, the upward revisions in growth forecasts have been "positive and strong”, following surprisingly strong results in 1Q19, they said. These include
22 TURKEY Country Report August 2019 www.intellinews.com