Turkey in sustainable recovery stage: S&P

ISTANBUL

Standard & Poor’s says Turkey has entered into a sustainable recovery stage. DAILY NEWS photo, Emrah GÜREL

The Turkish economy has entered into a sustainable recovery stage but advanced countries’ loose fiscal policies are urging its Central Bank to implement a challenging policy that has to balance growth and fiscal stability, credit rating agency Standard & Poor’s (S&P) said in a report released yesterday.

“Thanks to the widening of Turkey’s exports market shares in rising markets like the Middle East and North Africa in the past 10 years, the global trade trends will be in favor of Turkey,” Jean Michel-Six, S&P Europe, Middle East and Africa Chief Economist said in report released yesterday.

The Turkish economy is on a sustained recovery path, the report stressed, adding that while the country’s central bank faces a familiar policy dilemma, a rise in Turkish policy rates before the start of 2014 are not expected.

“Strong growth in Turkey’s main export markets outside of Europe, improved prospects for consumer demand, and solid investment growth should help GDP expand by about 4 percent this year and next,” said Six.

But expansionary G7 monetary policies - especially in Japan - pose challenges for the Turkish Central Bank, he added. “Strong capital inflows into the country could spark a surge in asset prices, as they have done in the past,” he said.

“In such circumstances, we believe the central bank could well be forced to maintain a difficult balancing act between the demand for growth and monetary stability… In a complex global financial environment, the central bank is likely to maintain a dovish stance for the best part of 2013 and continue to use the foreign reserve coefficients to limit the impact of foreign capital inflows, before engaging in a normalization process in 2014,” said Six.