IMF revises Turkey’s growth forecast for 2016, warns of ‘highly vulnerable’ world economy

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The International Monetary Fund (IMF) has upgraded its 2016 growth forecast for Turkey by 0.3 points in a report released on late Feb. 24, while the organization has pointed out a weakening global recovery, with the world economy “highly vulnerable” to adverse shocks. 

In its “Global Prospects and Policy Challenges,” which was released ahead of a G-20 Finance Ministers’ summit on Feb. 26-27 in Shanghai, the IMF forecasted Turkey to grow by 3.2 percent in 2016, up 0.3 points compared to its previous forecast.       

Growth in Turkey was also revised down to 3.6 percent from 3.7 percent in 2017 in the report. 

The global recovery has weakened further amid increasing financial turbulence and falling asset prices, warned the IMF in the report. 

“Activity softened towards the end of 2015 and the valuation of risky assets has dropped sharply, especially in advanced economies, increasing the likelihood of a further weakening of the outlook. Growth in advanced economies is modest already under the baseline, as low demand in some countries and a broad-based weakening of potential growth continue to hold back the recovery,” said the report. 

Adding to these headwinds are concerns about the global impact of China’s transition to more balanced growth, along with signs of distress in other large emerging markets, including from falling commodity prices, according to the report. 

Heightened risk aversion has triggered global equity market declines and brought a further tightening of external financial conditions for emerging economies and strong policy responses both at national and multilateral levels are needed to contain risks and propel the global economy to a “more prosperous path,” said the IMF. 

“These developments point to higher risks of a derailed recovery, at a moment when the global economy is highly vulnerable to adverse shocks. Financial market turbulence and asset price declines have tightened financial conditions in advanced economies and, if persistent, could further weaken growth. Emerging market stress could rise more, also reflecting domestic vulnerabilities. At the same time, there is a risk that the decline in oil prices will further destabilize the outlook of oil exporters while the impact on importers generates less demand support than expected, lowering global growth and exacerbating the current low-inflation environment,” said the report. 

Finally, shocks related to geopolitical conflicts, terrorism, refugees, and global epidemics loom over some countries and regions, and, if left unchecked, could have significant spillover impacts on global economic activity, warned the IMF.