|Economic growth lost momentum in the course of 2013, as capital market tensions pushed interest rates up. Credit and private demand decelerated. Export growth fell, notably due to rapidly declining gold sales. Political tensions have dented confidence, provoking capital outflows and forcing the central bank to raise interest rates sharply in early 2014. Growth is projected to remain subdued through mid-2015, while the current account deficit will remain very high.
Sustaining domestic and international confidence is crucial. Monetary, fiscal and financial policies should remain prudent. Improving fiscal transparency with timely general government accounts and comprehensive reporting on the activities of quasi-fiscal institutions is recommended. Disinflation is essential to preserve the bulk of recent competitiveness gains and to allowTurkey to benefit more from the projected recovery in global trade. Increasing the share of foreign direct investment inflows by improving business conditions in the formal sector would help reduce external vulnerability.
Note: All data definitions based on internationally comparable standards and may differ in specific cases from common national definitions.