TODAY’S – IMF report forecasts weaker economic performance for Turkey

IMF report forecasts weaker economic performance for TurkeyThe International Monetary Fund (IMF) predicts that Turkeyand#39s economic outlook will not be promising unless the country engages in a policy change.andldquoWithout a change in policies, medium-term economic performance is likely to be weaker than in the recent past,andrdquo the IMF said in its 2014 Article IV Consultation-Staff Report on Turkey released on Friday.

Stating that Turkeyand#39s low domestic saving and challenges related to competitiveness are limiting investment and exports, the report said that IMF staff revised the annual medium-term growth to about 35 percent on current policies and national saving rates. andldquoThe lower growth rate is expected to contain inflation and the deterioration of the current account, although both will remain elevated at about 6 percent,andrdquo the report read.

andldquoPolicies should focus on rebalancing the economy, reducing the external deficit — by boosting savings rather than decreasing investment — and lowering inflation to preserve competitiveness,andrdquo the reportand#39s summary said.Noting that Turkeyand#39s economy has grown on average by 6 percent annually since 2010, the report said this has come at the expense of a persistently large external deficit making the economy sensitive to changes in external financing conditions.

andldquoInflation is high and above the authoritiesand#39 target, and real policy interest rates remain negative. The exchange rate continues to be stronger than suggested by fundamentals,andrdquo it says.

According to the report, Turkish authorities broadly share the IMFand#39S outlook for Turkey. andldquoThey recognize downside risks to their original official growth forecast for 2014, and that inflation is likely to exceed their objective.

For 2015, however, the authorities see an acceleration of growth to around 4 percent, as they expect domestic demand to play a larger role. They believe the real exchange rate is close to equilibrium and judge that the improvement in the external balance will continue with increased net exports,andrdquo the report said.

It added that Turkish authorities acknowledge that, in the medium term, rebalancing the economy towards investment and exports is necessary to avoid a decline in trend growth. andldquoHowever, they believe their reform program will be sufficient to achieve this objective,andrdquo it said.

SOURCE: Today’s Zaman