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Economic growth is estimated to have exceeded 6% in 2017, driven by strong fiscal stimulus and an export market recovery, and is projected to edge down but to stay between 4½ and 5% in 2018 and 2019. Consumer price inflation remains far above the target and disinflation is projected to be slow.
As fiscal stimulus is scheduled to be withdrawn in 2018, against the backdrop of continuing regional and domestic uncertainties, strengthening business and household sentiment will be essential for maintaining growth momentum. Effective progress with the announced structural reforms, fiscal transparency and disinflation goals of the Medium-Term Economic Programme 2018-20 would bolster confidence and boost domestic and foreign private business investment.
Financial vulnerabilities stay high owing to the magnitude of foreign financing needs stemming from a persistently high current account deficit. Debt leverage in many non-financial firms has also increased considerably, limiting their capacity for additional borrowing and investment. The large government credit guarantee scheme introduced in 2017 alleviated short-term financial strains and is assumed to remain in force in the coming two years. However, to increase resilience, the ecosystem for equity participation by domestic and international investors in firms of all sizes should be upgraded.
Economic Survey of Turkey (survey page)