Turkish economy in soft landing, says World Bank

Turkish economy in soft landing, says World Bank

ISTANBUL - Anatolia News Agency
The World Bank has kept its forecast for 2012 economic growth in Turkey at 2.9 percent, it stated at a news briefing yesterday. The bank said the economic growth rate in Turkey would be 4 percent in 2013 and 5 percent in 2014, 2015 and 2016.

The slowdown in the rate of increase in domestic demand is in line with the World Bank’s soft landing scenario, the report read, pointing to risks such as the current account deficit, energy prices and external finance needs. Economic activity will increase in the second half of the year, according to the report.

Inflation is expected to be 7 percent in 2012, 5.2 percent in 2013 and 5 percent in 2014, 2015 and 2016, according to the bank.

“The rise in energy prices constitutes a downward risk in our base scenario,” the bank wrote in the report, adding that, in the short term, the direct effect of energy prices on inflation and the current account deficit comes to the forefront as a significant risk factor.

$10 increase in oil prices pushes inflation by 4 pct

Every $10 increase in oil prices may push the year-end inflation rate by 0.4 percentage points and may widen the current account deficit $5.6 billion, the report said, citing Central Bank studies.

Turkey’s dependency on external finance is one of the major risks and a big part of the economic growth is based on domestic and foreign savings, the report read.

The World Bank revised its forecast for the current account deficit as a proportion of gross domestic product to 7.8 percent from 7.6 percent due to a revision in the gross domestic product deflator.

Noting that Turkey could finance its current account deficit thanks to the loose global liquidity conditions in 2010 and 2011, the report cautioned about this year as the economic state of the European Union may have adverse effects on risk-taking appetite despite large-scale liquidity injection to debt-ridden member countries.

Turkey was not negatively affected by this process in the first half of the year, but the Turkish economy was fragile against abrupt stoppages of capital inflow scenarios.