World Bank likely to revise up Turkey’s growth forecast

WASHINGTON - Anadolu Agency

Turkey’s 2017 growth rate will be revised from 3.5 percent to around 5-5.1 percent as the country is expected to maintain its strong growth performance in the third quarter, the World Bank’s Turkey director has said.

“When the third quarter data comes out we will revise it and we are quite likely to revise it up to roughly the same amount as the IMF, around 5-5.1 percent, given the very strong growth performance that we saw in the second quarter, which we expect to continue in the third quarter,” Johannes Zutt told state-run Anadolu Agency on Oct. 18.

Zutt said Turkey had recovered successfully after the July 2016 coup attempt with the help of fiscal stimuli passed by the government.

“Obviously after the coup growth declined in the third quarter of 2016 but the government, which had been managing the economy quite well, had space for a fiscal stimulus and it used that space,” he added.

Zutt stated that a rise in Europe’s economic growth also reinforced this fiscal stimulus.

“That is what gave us a much more robust recovery than I think many people - and certainly we at the World Bank - anticipated,” he said.

They expect the Turkish economy to grow at around 3.5 to 4 percent in 2018, sustaining growth at a slightly lower rate than present, Zutt stated, stressing that the Turkish government “must undertake structural reforms” in order to carry the economy to a higher path of sustainable growth.

“There are a number of things that the government needs to do to make labor markets more efficient, to deepen capital markets, to improve public expenditure management, to get more from the education system, and to ensure Turkish workers are able to participate in a modern economy at very high levels,” Zutt said.

In the medium term, he emphasized that improving the productivity of Turkish firms was the biggest challenge for the country.

“What we should be seeing is more high technology embedded in Turkish exports going to Europe,” Zutt said.

‘Inflation will fall’

Commenting on Turkey’s inflation rate, Zutt said the tight monetary policy enacted by the country’s central bank was appropriate as a response to the inflation rate.

“We now have seen a jump to slightly over 10 percent but we anticipate that it will actually fall back to 7-8 percent going forward,” Zutt said.

According to the Turkish Statistical Institute (TÜİK), Turkey’s consumer prices went up by 11.20 percent year-on-year in September.

As for the Turkey’s greatest vulnerability, Zutt referred to the country’s reliance on capital inflows to finance the current account deficit, saying the savings rate was still not enough for investments.

He also noted that many Turkish companies have been rolling over their debts, worth $170 billion annually, which can be easily done thanks to fairly strong balance sheets and strong relationships with bankers both in Turkey and abroad.