IMF foresees 3.8 pct growth for Turkey, warns over current gap
WASHINGTONThe International Monetary Fund (IMF) has forecasted a 3.8 percent growth rate for Turkey this year with private consumption and public investment as the main contributors.
“The Turkish economy achieved a welcome reduction of imbalances in 2012. In 2013, growth has accelerated significantly on the back of a monetary and fiscal policy stimulus,” the IMF said, in the Article IV consultation with Turkey on Nov. 20. However, it warned that the current account deficit was widening again because of domestic demand-led growth.
The IMF’s Executive Directors noted the faster growth of the Turkish economy this year, due in part to policy stimulus. Nonetheless, they observed that the domestic demand-led growth was leading to a renewed deterioration in inflation and the current account deficit. In the period ahead, Directors encouraged the authorities to tighten their macroeconomic policies and step up structural reforms to strengthen external performance and bolster economic growth.
Inflation forecast at 8 percent
Turkey’s inflation is estimated to reach 8 percent this year as the country’s central bank forecasted it at 6.8 percent.
The Turkish economy was on track to meet its 2013 budget targets, despite rapid spending growth, the report said. “As one-off factors boosted revenues beyond projection, the government made use of these windfalls to increase capital expenditure significantly beyond the budget ceiling, while maintaining its overall deficit targets,” it said.
The banking system remained well capitalized, with capital ratios well above regulatory minima and non-performing loans (NPLs) remaining subdued, despite some uptick over the last year, it noted.
Directors also pointed out the Turkish economy’s low saving rate and reliance on external financing. They underscored the importance of raising both private and public saving and stepping up structural reforms to raise competitiveness, attract foreign direct investment, and enhance growth while reducing external imbalances.
“The authorities’ efforts to decrease energy dependence, increase labor market flexibility, reduce the informal sector, and reform private pension are in the right direction,” they said.