Low growth forecast from IMF

Monday, December 24, 2012

Turkey’s economy has so far managed a “soft landing” amid global financial woes, but the prolonged crisis in Europe, perennial trade imbalances and an “unconventional” monetary policy will keep the country’s growth at an average of 3.9 percent through 2017, the International Monetary Fund (IMF) predicted in a report published over the weekend.

The report, which was written in October but released on Friday, projected Turkish growth to be 3.5 percent in 2013, with renewed consumer spending pushing up imports and adding to the country’s trade imbalances.

In 2014, the economy would come closer to growth of 4.5 percent, the report continued, pegging growth below the 5 percent-plus predictions made by Ankara for 2014.

The IMF warned against efforts to bring back the fast growth Turkey saw in 2011, when the economy grew by 8 percent, suggesting that Turkey’s current period of 3 percent growth has allowed the country to re-balance its finances and acute current account deficit (CAD).

That call again goes against Ankara’s promise to return growth to 2011 levels by 2014, a policy the IMF said would lead to a “reversing disinflation and ”¦ a widening of the current account deficit.” The bank warned that accelerating inflation -- which currently hovers around 7 percent but was much higher earlier in the year -- along with a growing trade deficit and external finance shocks might lead to a “hard landing” if Ankara was not careful.

Despite the numerous warnings, the IMF warnings nevertheless said that Turkey would enjoy higher than average growth in the following years if it could enhance its “coordination of macroeconomic policies, higher savings, and improved competitiveness.”

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