Uncertainty weighs on Turkish economy, but new gov’t may resolve policy issues: Senior economist

ANKARA - Anadolu Agency

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The Turkish economy is currently weighed down with political uncertainty, but a new government could resolve policy issues and move the country forward, World Bank Chief Economist Franziska Ohnsorge told Anadolu Agency on June 11.

The bank has forecast 3 percent growth for Turkey in 2015. But uncertainties after the elections could hurt growth if there is a prolonged period of political instability, Ohnsorge said.

“We have to see what the future actually brings,” she warned.

Ohnsorge explained the bank’s growth forecast was based on a number of potentially improving factors.

“We expect a much more benign external environment, as the euro area is clearly picking up. Financing costs [for external debt] are still low,” she said, noting there were potential downside risks, including a possible rate hike by the Federal Reserve or rising capital outflow from emerging markets, but they may not materialize next year. 

“On top of that, the uncertainty ahead of the elections has now been relieved, so confidence will pick up strongly in the rest of this year and next year,” she said.

“In the run up to the elections, we have seen already that these political uncertainties weighed on investment. Going forward we hope that the election will resolve some of these uncertainties and that strong policies will support improvement in growth to 3 percent this year and 3.9 percent in 2016,” she said.

Ohnsorge evoked the danger of an increase in interest rates in the U.S.

She pointed out that her institution had also asked the Federal Reserve to postpone an interest rate hike, as Managing Director of the International Monetary Fund (IMF) Christine Lagarde did recently. She warned that a rate hike may adversely affect the U.S. economy and be especially negative for emerging economies.