Published On: Sun, Dec 9th, 2018

The economic developments to come in 2019 and impacts on Turkey’s economy




The global economic developments to come in 2018 and impacts on Turkey

In 2019 FED is expected to tighten financial conditions in the markets to help slow growth and prevent the economy from overheating in which case it is forecasted to withdraw US$ 600 billion from the markets. In 2020 monetary tightening will continue and FED it will withdraw another US$ 600 billion dollars.Therefore 2019 will be a difficult year in terms of finding foreign sources for countries like Turkey and it goes without saying cost of such funds will be much higher as compared to normal times.

It is noteworthy to mention at this point that Turkey has to find about US$ 200 billion in 2019 to keep the economy going. Experts note that this country has been late to take necessary actions including structural reforms to be made, in the first place.

On the other hand it will be a most difficult period for companies/businesses as well. Companies with foreign currency revenues corresponding to at least fifty percent of their total income could feel comparatively more comfortable in the period to come. Then again companies with revenues in lira and debts in foreign currency could feel a much stronger negative impact in said period.

When we look at some indicators regarding the economic performance of Turkey currently we see the following:

First of all it is no secret that industrial production which has the highest impact on growth has seriously slowed down and come around the level of zero. It corresponds to 25 percent of GNP (Gross National Product) but it substantially effect the remaining 75 percent as it is connected all other sectors

Turkey was able to achieve zero growth in third quarter 2018 and to be even worse the growth figure is expected to become negative in last quarter of the current year. It is reported that the administration has revised the figure for 2018 as 1.5 percent whereas it was calculated at 6 percent for the first half of the year.

Unemployment figure suffers serious increase as does the inflation figure for 2018. In fact we see a very high figure of 25 percent as far as consumer price index is concerned and a higher figure of 45 percent for production price index which is obviously more concerning.

The drop in inflation in November (and probably in December) is considered to be temporary by experts and an upward trend is expected to be observed right after that.

Current account balance seems to have improved with a downward trend most recently but this is considered to be mostly due to the decline in growth as imports have substantially dropped as well in parallel to the slowdown in production.

In the meantime the economic indicators forecast of the government for 2019 is shared as follows:

Growth: 2.3 percent
Inflation: 15.9 percent
Unemployment: 12.1 percent
US dollar rate: 6.03 Turkish Lira

All in all, the picture awaiting Turkey’s economy in 2019 seems to be a true challenge and the administration will have to perform in an extraordinary manner to cope with it.

 





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