Growth in Turkey is likely to accelerate this year following a sharp slowdown in 2012, according to the EBRD’s latest Regional Economic Prospects report, published today.
The report predicts a slight moderation in growth in 2014 and warns that Turkey’s large and persistent current account deficit and the country’s dependence on volatile portfolio capital inflows to finance this deficit remain major sources of vulnerability.
The EBRD is forecasting growth of 3.7 per cent in 2013, after just 2.2 per cent in 2012. It sees growth slipping back slightly to 3.6 per cent in 2014.
The report says stronger-than-expected growth in the first half of 2013 was driven primarily by domestic demand, boosted by monetary easing and a surge in government spending.
Growth prospects for the remainder of the year dimmed following domestic disturbances and market volatility over the summer. While necessary to contain inflation pressures, recent tightening by the central bank is expected to contribute to a slowing down of economic activity in the second half of the year.
The report says recent capital outflows increased the risks facing the economy. The prospect of tapering of the US Fed’s quantitative easing programme led to a reversal of capital flows. However, markets stabilised following the Fed’s decision to delay tapering.