World Bank predicts a 5.5 pct contraction

Bloomberg

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The Washington-based institution lowered its gross domestic product forecast from a contraction of 2 percent forecast in March, according to its Global Development Finance report. The bank forecast a return to growth in 2010 of 1.5 percent, unchanged from the previous report. The economy will grow 3 percent in 2011, it said.

The global credit crunch has driven Turkey into its first recession in seven years, as demand shrinks at home and in the country’s main export market, the European Union. The country is negotiating a loan accord with the International Monetary Fund and talks have demonstrated a "convergence" of views, the fund’s deputy head John Lipsky said on June 19.

Turkey’s current-account deficit will shrink to 1.9 percent of GDP this year from 5.6 percent in 2008, the World Bank said. The deficit will be 1.9 percent in 2010 and 2 percent in 2011, according to the report.

Dependency

Meanwhile, Turkey has broken its "dependence" on the IMF by resisting conditions for a new loan accord, said Nurettin Canikli, a government lawmaker who's involved in economic policy-making, according to Milliyet newspaper.

Turkey's economy has shown it's capable of "standing on its own feet" without the IMF, Canikli said in Ankara, according to Milliyet.