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Following a strong recovery in 2017 and turbulence in spring 2018, economic growth is set to slow but to stay around 5% in 2018 and 2019. The uncertainties surrounding the early elections in June, as well as persisting regional geopolitical tensions, create risks. The exchange rate remains highly volatile, with the lira depreciating substantially recently despite a significant increase in the policy interest rate, and consumer price inflation is far above target. Disinflation is projected to be slow.
A credible macroeconomic framework is of utmost importance to uphold confidence in this sensitive environment. The Medium-Term Economic Programme provides a prudent fiscal framework, and recent monetary tightening should be backed with stronger institutional credibility of monetary policy. Structural reforms to align the business environment with international good practices should be stepped up as soon as possible to rebalance growth and make it more inclusive.
Economic Survey of Turkey (survey page)