Economic Outlook: Under the shadow of the Central Banks
The external demand’s contribution to growth increases and Turkey is again in a rebalancing cycle
According to Deloitte’s Economic Outlook Report, the global economy, albeit slowly, continues to recover. On the other hand, the growth of the Turkish economy relatively slows down. By the end of 2014, the growth rate is expected to be 3.5%, inflation is expected to be around 8.5% and the proportion of account deficit to GDP is projected to realize between 5.5%-6%.
In addition to the key facts about and expectations for the global economy, the report also provides estimations in relation to growth, account deficit and inflation for the Turkish economy. According to the report, while the global economy is steadily recovering, the growth expectations for this year are revised slightly downwards. However, the overall outlook is positive and no drastic change is expected. Although, the US economy has experienced 5-year high quarterly contraction in the first quarter of the 2014, this sharp conraction is expected to be temporary. Meanwhile, the signs of economic recovery in the Euro Zone are weaker. For instance, the economies of Italy and Greece continue to contract and this indicates the continuing fragility of the global economy. The developing countries are expected to lead the economic recovery, however, in order to record strong growth rates and play a leading role,,these markets have to go through structural reforms.
Turkey is going through a rebalancing cycle in 2014 which is similar to that of 2012, however, in the mid-term Turkey needs to build a new story. In order to meet the growth expectations of 4% and above, and to keep the inflation rates in line with the targets and a more reasonable account deficit to GDP ratio, Turkey needs to focus on productivity and supply side. However, with the upcoming Presidential elections at the beginning of August and the general elections next year, the realization of this target seems to be difficult until the political scene is much more stable.