EBRD cuts 2014 growth forecast for Turkey

EBRD cuts 2014 growth forecast for Turkey

EBRD cuts 2014 growth forecast for Turkey

The EBRD has slashed its estimate of 2014 growth for Turkey, warning of large macroeconomic imbalances. DAILY NEWS photo, Emrah GÜREL

Growth in Turkey is likely to accelerate to 3.7 percent this year before moderating slightly to 3.6 percent in 2014, the European Bank for Reconstruction and Development (EBRD) has forecast in its latest “Regional Economic Prospects” report.

In its May forecast, the EBRD had foreseen a GDP growth of 4 percent for 2014, but it has now lowered its predictions amid warnings against large macroeconomic imbalances, as Turkey’s current account deficit is still above 6 percent of GDP, leaving the country vulnerable to sudden shifts in global market sentiment. 

The Turkish government has already cut its 2013 GDP growth estimate from 4 to 3.6 percent and its 2014 forecast from 5 to 4 percent.

US tapering reverses capital flows

Overall, the bank cut its 2013 forecast for Central and Eastern Europe from 2.1 to 2.0 percent, and its 2014 projection from 3.1 to 2.8 percent.

Turkish economic activity picked up in the first half of the year, driven mainly by domestic demand, but the Central Bank’s recent decision to contain inflation pressures through tightening is expected to further moderate economic activity in the second half of the year, the EBRD said.

“The prospect of the tapering of the U.S. Fed’s quantitative easing program has led to a reversal of capital flows since May 2013, and the currency weakened to record lows against the U.S. dollar [losing about 15 percent of its value at one point]. However, markets have stabilized since then, following the Fed’s decision to delay tapering,” the EBRD said.

Regional, global risks remain 

The bank also cut its 2013 forecast for Russia from 1.8 to 1.3 percent, and for 2014 from 3.0 to 2.5 percent, citing subdued investment and a drop in the price of oil, the country’s biggest export. It said Russia grew at a healthier 3.4 percent clip last year.

The bank, which focuses on investment in the private sector, also cut its forecasts for its newest countries of operation, Egypt, Jordan, Morocco and Tunisia. Growth for the North African and Middle Eastern economies was forecast at 2.8 percent this year and 3.5 percent in 2014, down from 3.0 and 4.1 percent, respectively. Political instability remained a concern in Egypt and Tunisia, the EBRD said.
The likelihood has decreased of a worsening eurozone crisis, the bank said, while noting that it could still pose a risk to forecasts.

Other risks came from a slowdown in China and other large emerging economies, and from a deadlock over raising the U.S. debt ceiling, the EBRD said.