Turkey’s government cuts economic growth forecast for this year
The Turkish government has cut its official 2016 economic growth target to 3.2 percent from the earlier estimate of 4.5 percent through its new medium-term economic program yesterday. Meanwhile, the government is upbeat of the economic growth reaching 4.4 percent pace by next year, partially with the assistance from additional fiscal spending, said Commerzbank in a research note. Therefore the fiscal deficit target for next year has been broadened to almost 2 percent of GDP from 1 percent.
Furthermore, the government has widened the current account deficit forecasts for 2016 and 2017 as well by 0.5 percentage points of GDP. In all, Deputy PM Mehmet Simsek had hinted last week of these changes and they show a more realistic scenario of the Turkish economy, according to Commerzbank. The Turkish lira reacted slightly negatively to the new forecasts. Nonetheless, the main risk is with the projections for 2017. The official plan appears to undertake‘normalization’ for granted following the emergency rule, added Commerzbank.
Nonetheless, there has been a clear loss of economic momentum that had been taking hold ever since the 2015 election season and there are no drivers for breaking out of that trend next year, said Commerzbank.
“This is why we forecast 2.3 percent growth this year and 1.9 percent next year. Our USD/TRY forecast for the end of 2016 remains at 3.20”, stated Commerzbank.