2013-10-19 09:44:27 - Fast Market Research recommends "Turkey Business Forecast Report Q4 2013" from Business Monitor International, now available
We expect economic growth to accelerate modestly in 2014 and 2015, although our forecasts are well below consensus. A loss of investor confidence following recent social unrest and global financial market turmoil will slow capital inflows and cap the potential growth of Turkey's credit and consumption-driven growth model. With relatively healthy budget and debt dynamics, the government is in a position to provide a more pronounced fiscal boost to the economy. However, we expect fiscal discipline to remain relatively high on the government's agenda, with monetary policy playing a more active role in supporting growth.
After substantial widening of external imbalances in 2013, we expect Turkey's current account deficit to narrow only gradually in coming years. Turkey will remain reliant on
short-term foreign capital inflows to cover the sizeable current account shortfall, leaving it prone to shifts in international risk sentiment and leaving open the potential for financing crises.
Full Report Details at
- www.fastmr.com/prod/694773_turkey_business_forecast_report_q4_20 ..
Recent protests have highlighted the fact that major political challenges still face the country over the medium term. In particular, the government will struggle to secure a multi-party consensus on the process of writing a new constitution, and the ruling Justice and Development Party will face growing and more vocal public opposition, with the potential for further unrest. Moreover, Turkey faces a challenging foreign policy environment amidst heightened regional tensions as the government attempts to cement its role as an economic and political power in the region.
Major Forecast Changes
We have revised down our 2014 and 2015 real GDP forecasts for Turkey on the back of tightening monetary conditions and our expectation for a less amenable global environment for emerging market growth. We now expect growth of 3.1% and 3.4% in 2014 and 2015 respectively, from 4.2% and 4.8% previously. Nevertheless, if the Turkish authorities are able to weather the rebalancing process and challenging external financing environment over the next few quarters, the country's long-term growth story remains an attractive one.
Key Risks To Outlook
The major risk to Turkey's macroeconomic trajectory stems from its external financing requirement. Turkey's large current account deficit and dearth of foreign direct investment inflows leaves the country vulnerable to external shocks and a major outflow of foreign capital. As such, while we see potential upside risks to our short-term forecasts, should global risk appetite pick up again we believe risks are weighted primarily to the downside.
Partial Table of Contents:
Major Forecast Changes
Key Risks To Outlook
Chapter 1: Political Outlook
BMI Political Risk Ratings
Short-Term Political Outlook
AKP Support To Wane
- Although Turkish Prime Minister Recep Tayyip Erdogan's ruling Justice and Development Party (AKP) faces no viable opposition in upcoming elections, recent events have damaged its credibility and reputation both domestically and on the world stage. This threatens to derail Erdogan's political ambitions while expediting a slowdown in economic growth, increasing the scope for a sustained decline in AKP support in coming years.
Long-Term Political Outlook
Structural Changes To Continue
- Turkey's moderate Islamist Justice and Development Party (AKP) will continue to press ahead with reforms to the country's political and social system for the foreseeable future. Although the AKP continues to enjoy broad popular support, there is growing and increasingly visible opposition from the traditional secular establishment which threatens to trigger a wider backlash. In terms of foreign policy, we expect Turkey to continue rebalancing its interests away from the West in favour of closer ties with the former Soviet Union and the Middle East and North Africa.
TABLE: POLITICAL OVERVIEW
Chapter 2: Economic Outlook
BMI Economic Risk Ratings
Solid Q2 Masks Weakness
- A strong GDP growth reading in Q213 masks underlying weakness in the Turkish economy. Turkey's externally leveraged, consumption driven growth model will become unsustainable as demand for emerging market assets wanes and monetary conditions tighten in coming quarters. We forecast real GDP growth of 2.8% in 2013 to accelerate only modestly to 3.1% and 3.4% in 2014 and 2015 respectively, well below consensus expectations.
Balance Of Payments
Financing Risks Remain
- Turkey's current account deficit will widen to 6.9% of GDP in 2013, before moderating domestic demand and waning financial account inflows contribute to a gradual external rebalancing, bringing the deficit to 5.9% by 2015. However, in the context of a long-term decline in demand for emerging market assets, heightened investor perceptions of sovereign risk in Turkey and a loss of monetary policy credibility create a non-negligible risk of a financing crisis.
TABLE: CURRENT ACCOUNT
Fiscal Consolidation On Hold As Growth Slows
- Although we remain broadly constructive towards Turkey's fiscal trajectory, we expect budget deficit consolidation to take a breather in 2014 and 2015 as revenue growth weakens and government expenditures prop up slowing economic growth. After falling to 1.9% of GDP in 2013, we forecast the budget deficit to reach 2.4% and 2.8% in 2014 and 2015 respectively.
TABLE: FISCAL POLICY
Central Bank Gamble Won't Pay Off
Full Table of Contents is available at:
About Business Monitor International
Business Monitor International (BMI) offers a comprehensive range of products and services designed to help senior executives, analysts and researchers assess and better manage operating risks, and exploit business opportunities, across 175 markets. BMI offers three main areas of expertise: Country Risk BMI's country risk and macroeconomic forecast portfolio includes weekly financial market reports, monthly regional Monitors, and in-depth quarterly Business Forecast Reports. Industry Analysis BMI covers a total of 17 industry verticals through a portfolio of services, including in-depth quarterly Country Forecast Reports. View more research from Business Monitor International at www.fastmr.com/catalog/publishers.aspx?pubid=1010
About Fast Market Research
Fast Market Research is an online aggregator and distributor of market research and business information. We represent the world's top research publishers and analysts and provide quick and easy access to the best competitive intelligence available.
For more information about these or related research reports, please visit our website at www.fastmr.com
or call us at 1.800.844.8156.