Global and Turkish Economic Outlook
Questions and answers
According to Deloitte’s Economic Outlook Report, although the first quarter growth rate is above expectations, the relative weakness in both the level and composition of growth continues. Deloitte expects a 2.5% growth rate, higher than expected inflation and a relatively high account deficit to GDP ratio in 2015.
According to Deloitte’s Economic Outlook Report, Turkey’s response to the uncertain environment in the aftermath of the general elections has not been as negative as expected. On the other hand, weak economic growth, vulnerabilities along with FED’s gradual monetary normalization approach requires establishment of a harmonious coalition with credible economy officers.
2.5% growth in 2015
The report states that the major reason behind 2.3% growth in the first quarter was higher than expected increase in private consumptions. Although the growth rate is above expectations, the relative weakness in both the level and composition of growth continues. Deloitte expects a growth rate of approximately 2.5% for 2015.
A comprehensive macroeconomic policy is a must
The report emphasizes that based on current economic conditions, the most critical need is development of a comprehensive macroeconomic policy. Furthermore, it is highlighted that this policy should focus on vulnerabilities in the short term and reforms to increase productivity in the long term.
The recent decline in inflation rate will not be permanent
Despite the optimistic expectations regarding inflation at the beginning of the year, the rising food prices and devaluation of the Turkish Lira caused an increase in inflation rate. The decrease in food prices and Turkish Lira’s relative stability after April, on the other hand, indicates that the overall fall in inflation levels could continue in the upcoming months. However, according to the report, the imbalance between supply and demand along with pessimistic expectations could inevitably cause a rise in inflation levels in the future.
Four major global risks along with uncertainty should be monitored
The report indicates four major risks that Turkey should monitor closely in the upcoming period:
1- Greece debt crisis
2- FED’s timing and impact of interest rates
3- Economic transformation process in China and the response of the markets
4- Strong fluctuations in securities market
The impact of China and Greece is expected to be limited, as a result of Turkey’s weak direct trade and credit-funding relations with Greece and China. However, FED’s interest rate fluctuations stands as the most critical risk for Turkey.