|Growth has lost momentum in 2014. Policies to hold back domestic demand in the face of a large current account deficit, increased volatility in capital flows and political uncertainties led to a sharp deceleration in private consumption and investment. This was offset to some extent by a pick-up in exports. In the context of serious regional geopolitical tensions and the sluggish recovery in Europe, exports are projected to be subdued and GDP growth to be relatively weak by Turkish standards, at 3¼ per cent in 2015 and 4% in 2016. The current account deficit is set to stay above 5% of GDP, and large short-term foreign debt refinancing needs make Turkey vulnerable to shifts in international investor sentiments.
Enhancing the credibility of monetary policy is essential with inflation far above target despite ample slack. The central government accounts signal no fiscal loosening in the on-going electoral cycle. However, general government outcomes cannot be assessed accurately in a timely way. Fiscal monitoring and transparency should therefore be improved along international standards. Structural reforms, including those outlined in the National Development Plan 2014-2018, are needed to boost productivity in the business sector, to achieve durable competitiveness gains and balanced growth.
Note: All data definitions based on internationally comparable standards and may differ in specific cases from common national definitions.