Turkey: Government sets out projections for 2013-2015

Turkish Government has released Medium Term Economic Programme setting out projections for 2013-2015. Following Turkey’s economic slowdown and anticipated soft landing, the programme lowers growth predictions for 2012 to 3.2% and acknowledges that inflation targets (of 5.3%) are not likely to be met, raising them to 7.4%.

Down below are some valuable indications  observed by the British Consulate General Istanbul as to how the Turkish economy is likely to develop in the coming period.

29.10.2012
Editor, BTT

A report on how the economy is likely to develop in Turkey based on Medium Term Economic Programme 2013-2015

We reported earlier that although predictions for growth for 2012 had dropped to 3%, unemployment and inflation were also falling; and that this looked likely to place Turkey on track for a soft landing after concerns about overheating.

On 9 October the Turkish Government published its annual Medium Term Economic Programme (MTEP). The MTEP revised growth forecasts for 2012 down from 4% (predicted at the beginning of the year) to 3.2%. It also revised down growth forecasts for 2013 from 5% to 4% and left the forecast for 2014 unchanged at 5%. Deputy PM Ali Babacan said that despite the state of the global economy, Turkey was performing well. He said domestic demand would drive economic growth in the coming years.

The MTEP increased the Government’s inflation target for 2012 from 5.3% to 7.4%. The increase follows recent announcements that the Government would raise electricity and gas prices by 10%, along with further tax increases on some consumer goods.

The MTEP also revised Turkey’s fiscal targets. The budget deficit target was revised upwards from 1.4% to 2.3%. This trend was highlighted on October 16, when Babacan announced a deficit of TL14.4 bn in the first nine months of the year compared to the budget surplus of TL0.2 bn raised in the same period of last year.

Comment

The comparatively healthy growth forecast of 3.2% for 2012 looks soundly based. It is in line with the revised figures in IMF’s World Economic Outlook, published on October 9, which foresees 3% and 3.5% growth for Turkey in 2012 and 2013. As noted in Diptel under reference, although the figures signal a slowdown after growth of 8.5% in 2011, they contain much good news, e.g. the forecast that the current account deficit (CAD) will narrow to 7.3% of GDP this year from 10% at end-2011. This, too, sounds plausible: as of late August, most of this target had already been achieved. Unemployment also continues to fall: analysts forecast it will stand at 9% by the end of the year.

All this continues to support the Government’s argument that a soft landing has been achieved, rather than the boom-and-bust cycles of previous decades. Figures could yet be negatively affected eg by continued turmoil in Syria and economic weakness in other MENA markets and the Eurozone. But for now the figures are good and we should continue to explain to British businesses considering investing in or exporting to Turkey that the economic fundamentals look sound.

Disclaimer

The purpose of the FCO Country Update(s) for Business (”the Report”) prepared by UK Trade & Investment (UKTI) is to provide information and related comment to help recipients form their own judgments about making business decisions as to whether to invest or operate in a particular country. The Report’s contents were believed (at the time that the Report was prepared) to be reliable, but no representations or warranties, express or implied, are made or given by UKTI or its parent Departments (the Foreign and Commonwealth Office (FCO) and the Department for Business, Innovation and Skills (BIS)) as to the accuracy of the Report, its completeness or its suitability for any purpose. In particular, none of the Report’s contents should be construed as advice or solicitation to purchase or sell securities, commodities or any other form of financial instrument. No liability is accepted by UKTI, the FCO or BIS for any loss or damage (whether consequential or otherwise) which may arise out of or in connection with the Report.

British Consulate General Istanbul