Goals depend on external financing

ISTANBUL- Hürriyet Daily News

The construction sector in Turkey will remain strong in 2012, according to the annual outlook report by İş Investment. DHA photo

The fate of Turkey’s economy depends on external financing as the country’s performance signals a hard landing with a 1.5 percent expected GDP growth rate, as projected by a top economist yesterday, who predicts a bumpy and challenging road ahead.

“Turkey’s external financing needs will be a decisive factor in economic growth and current account targets,” said Burcu Ünüvar, senior economist at İş Investment, speaking to the Daily News at the Investment Strategies 2012 meeting.She pointed out that if Turkey were to receive $120.4 billion in external financing then they could achieve nearly 1.7 percent growth.

However, if the country does not receive the necessary funding for this year, then growth could be as low as minus 2.5 in the worst case scenario. Evaluating the Central Bank’s dollar sales Dec. 30, 2011 and the first two trading days of this year, she said, “If a country is this dependent on external financing, interventions cannot continue for long.”

‘Ain’t no sunshine in exports’
“Ain’t no sunshine on the export front” read the strategy report for 2012 prepared by İş Investment analysts. Four out of Turkey’s top five trading partners are in Europe (Germany, United Kingdom, Italy and France) with a 34 percent share of total exports.

“These countries are the ones currently subject to the most severe risks, and things do not seem bright in alternative markets like the Middle East and North Africa,” said Ünüvar. Accounting for roughly 10 percent of Turkey’s imports and exports, the slowdown in Germany warrants a closer look, according to the economist.

Domestic demand constitutes nearly 70 percent of Turkey’s gross domestic growth, Ünüvar said, with a limited level of household leverage at 20 percent of GDP, fuelling the strong borrowing appetite. “The upshot of this is the Turkish economy has moved towards leveraging, while the rest of the world is striving to deleverage.”

Moreover, Turkey’s savings fell short of the country’s investment needs, she said. According to official data, savings in Turkey were at 13 percent of GDP at the end of 2011, around 21 points below that of emerging economies.