Turkey’s growth estimates dip below 3 percent

ERDAL SAĞLAM

Estimates were first pulled down to between 3 and 3.5 percent. Recently, they have been lowered to under 3 percent. While the OECD revised its growth estimate for Turkey this year to 2.9 percent, Morgan Stanley lowered its estimate down to 2.6 percent. 

Preliminary data regarding the third quarter growth rate, which will be announced at the beginning of December, points out for the first time in a while that we will see negative growth figures. The government has seen this and has introduced several measures aimed at boosting demand. But these measures have not created the desired effect due to foreign exchange rate hikes and increased uncertainty. Even though government members vow that growth will improve, especially in the fourth quarter, we cannot yet see this. 
That is why it is widely estimated that the economic decline experienced in the third quarter will continue into the fourth quarter. For this reason, estimates are coming one after the other that the overall growth rate for the whole year will drop below 3 percent. 

Following Morgan Stanley, the OECD also announced that it expects lower-than-estimated growth for this year. While the OECD lowered its Turkey growth estimate for 2016 from 3.9 percent to 2.9 percent, it has also lowered its growth estimate for 2017 from 3.7 percent to 3.3 percent. 

Effect of lower growth

In the Medium Term Program, the growth expectation for 2016 was revised down from 4.5 percent to 3.2 percent. But in the current state of affairs it looks like it will be very difficult even to reach this modest figure. 
Such a sharp drop in growth rates will also negatively affect other related parameters. More than anything else, it will cause a fall in the national income per capita figures. The per capita figure, which is calculated based on U.S. dollars, will also show a much sharper decline due to the rapid hike in the value of the dollar.  
As several other data on the country’s economic situation are calculated based on national income figures, we will see a deterioration in them too. For instance, the ratio of the current account deficit to national income, which is an important indicator for external loans, as well as the ratio of external and domestic debts to national income, will increase to an unpredictable extent. Additional difficulties will be experienced in attracting essential international capital because of these deteriorating parameters. 

While declines that occur in these indicators were highlighted in the recent Morgan Stanley and OECD reports, it was also estimated that this situation would negatively affect the international ratings agencies when they assess Turkey.  

In short, falling growth figures are set to only intensify existing problems in the Turkish economy.