OECD slightly revises up 2017 Turkey growth forecast, urging reforms for further momentum

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The Organization for Economic Cooperation and Development (OECD) has revised up its 2017 economic growth forecast for Turkey to 3.4 percent, up from 3.3 percent in its previous report, saying that the Turkish economy mostly recovered from severe shocks in 2016. 

In its latest global economic growth outlook, which was published on June 7, the OECD slightly revised down its 2018 forecast to 3.5 percent from a previous 3.8 percent, and noted that reforms should be implemented for further growth. 

“Given continuing regional geopolitical tensions, and prior to general elections in 2019, growth is projected to edge up to around 3.5 percent in 2017 and 2018. If long-delayed economic reforms are implemented, confidence could improve and growth could be stronger,” the OECD said in its Turkey report. 

“If instead geopolitical strains or domestic political tensions worsen, or if relations between Turkey and the European Union and the planned renegotiation of the Customs Union Agreement suffer, business confidence, investment and growth would be weaker and tensions may arise in securing the large external funding needs - including the roll-over of the significant external corporate debt stock,” it also warned. 

Specific developments affecting tourism may also have an impact on growth, according to OECD. 


5 percent ‘likely’

Deputy Prime Minister Mehmet Şimşek said an around 5 percent of growth is likely if the required reforms are implemented. 

“The OECD has revised up its 2017 growth forecast for Turkey to 3.4 percent. The actual growth will be higher and likely hit 5 percent through reforms,” he said on his Twitter account on June 7. 

Fiscal and other measures, supported by a pick-up in export demand, have stimulated private consumption and investment, the OECD also noted, adding that their impact on public finances and the quality of credit allocation should be monitored. 

“Faced with sharp exchange rate depreciation and rising inflation expectations, the monetary stance has been tightened, but explicit increases in the main policy rate are warranted,” it noted. 

The OECD also revised up its 2017 inflation forecast to 10.4 percent from a previous 7.7 percent and its unemployment estimate to 10.8 percent from a previous 10.7 percent, mainly warning about a sharp rise in the country’s youth unemployment rate. 

While concerns about the global economy continue to plague investors, the OECD has forecast that the global economy is on course for its fastest growth in close to six years but has warned that countries need to strive to do better.

The Paris-based organization has predicted that the global economy is set to grow 3.5 percent in 2017, followed by an increase to 3.6 percent in 2018 as confidence is increasing and investment and trade are picking up from low levels.


More needed globally

“After five years of weak growth, there are signs of improvement,” OECD Secretary-General Angel Gurría said launching the outlook during the organization’s annual Ministerial Council Meeting and Forum in Paris. 

“The modest cyclical expansion underway will not, however, be sufficient to sustain strong gains in standards of living across OECD countries. Deeper, sustained and collective commitment to coherent policy packages that support inclusiveness and productivity growth are urgently needed. We need a more inclusive, rules-based globalization that works for all, centered on the people’s well-being,” Gurría said, according to a follow-up press release. 

Although the OECD upped its forecasts for global growth for 2017, it downgraded its estimates for the United States.

The growth forecast for the U.S. was downgraded to 2.1 percent this year and 2.4 percent next year, down from estimates in March of 2.4 percent and 2.8 percent, respectively.