Ankara, December 23, 2014— A weak Q3 GDP print means end-year growth is likely to come in just above 3 percent. However the disappointing headline number is mainly due to a reduction in inventories with other components of domestic demand signaling improvements, according to the World Bank’s Turkey Regular Economic Brief[i] No: 5- issued today in Ankara. Moreover, the outlook for inflation and the current account has improved substantially due to a sharp decline in oil prices. The World Bank’s 2015 growth projection remains unchanged at 3.5 percent.
“Thanks to lower oil prices, Turkey will achieve significant external rebalancing in 2015 with the current account projected at 4.5 percent of GDP and inflation coming down to 6.7 percent.” said Senior Economist Kamer Karakurum Özdemir. However, the brief cautions that renewed weakness in the currency shows, once again, that Turkey is vulnerable to a change in investor sentiment and that the room for monetary policy maneuver is consequently limited. While private consumption is expected to return to being the main driver of growth, political uncertainty and the volatility in global markets will continue to weigh on investor sentiment.
Country Director for Turkey Martin Raiser stated: “Turkey’s growth prospects beyond 2015 depend on the recovery of private investment and a resumption of productivity growth. For this, a signal of the Government’s commitment to a level playing field for all investors is needed. The new 25 Transformation Programs provide such an opportunity, but moving beyond announcements to implementation will be critical.”
Against this background, the World Bank in 2014 has supported projects to enhance Turkey’s competitiveness including a Development Policy Loan supporting key reforms in capital and labor markets; additional financing to BOTAŞ for the completion of the Tuz Gölü Gas Storage Facility; and further financial support for Turkish SMEs focused on innovative instruments such as Islamic financing and factoring.
The World Bank’s work in Turkey is based on a joint Country Partnership Strategy (CPS) for the period of 2012-2016. The CPS aims to support Turkey’s transition to high income with financing of up to US$ 6.45 billion during the five year period, as well as with policy analysis and advisory services. Key objectives include enhanced competitiveness and employment, improved equity and public services and deepened sustainable development. The World Bank’s partnership with Turkey is evolving to include the sharing of knowledge and experience with a wider international audience.
[i] Turkey Regular Economic Brief is a two pager brief assessing current developments in the Turkish macro economy and provides World Bank quarterly forecasts on key macroeconomic variables, linking these to underlying trends in structural reforms.