A reliable economic programme for Turkey ahead
The Turkish government recently unveiled its new economic programme which would be taken into account as a source when doing business by many official organization and international investors. Previously this programme had a visionary impact and the government many times failed to attain its targets. EEC found the latest economic programme quite realistic in the sense of macroeconomic achievements.
Turkey has long aimed to become the 10th largest economy of the world by the year 2023, with a gross domestic product (GDP) amount of $2 trillion and GDP per capita of $25,000. This target was set by the current government Justice and Development Party (AKP) which is in power since 2002. Currently, Turkey's GDP stands at $820billion. To attain its centennial goal Turkey has to grow 9 per cent per year, an almost impossible move.
Contrarily enough, the government's medium-term economic programme which was unveiled in mid-October was quite realistic, with an upward revision on Turkey's inflation target and a downward one on GDP growth rate. Previously, the government's target for GDP growth rate in Turkey for this year was 4 per cent; this was found to be highly optimistic by many economists and analysts. EEC's expectation for growth rate in 2014 in Turkey was above market consensus and around 3 per cent and EEC was especially convinced with this expectation after a stronger than expected 1st quarter (Q1/14) growth rate in Turkey, at 4.7 per cent. The market consensus for this year's growth rate was around 1 to 2 per cent. Despite global economic slowdown, Turkey's growth rate is not discouraging for this year. The government moved the growth rate forecast down to 3.3 per cent for this year and kept its goal of 4 per cent growth rate for the next year.
Another reliable move came from the inflation front. Previously, the government had set a very ambitious target of 5.3 and 5 percent targets of inflation respectively for the years 2014 and 2015. Now the targets are revised up to 9.4 per cent for this year and 6.3 per cent for the next year. The Central Bank of Turkey on the other hand, estimates lower inflation figures, 8.9 per cent for this year and 6.1 per cent for the next year. Food inflation and currency value did not help inflation this year; Turkey is experiencing a high exchange rate pass-through effect, although declining its effect is around 14 per cent. Food inflation on the other side is expected to increase 12 per cent annually by the end of this year. The Central Bank of Turkey lifted its expectation for the rate of increase in food inflation for 2015 to 9 per cent from 8 per cent.
All in all, EEC found the macroeconomic goals of the government for this year and the next year quite realistic and we are comfortable that these targets can be achieved in the absence of a shock. The reliability of the programme will increase the investor's confidence. EEC expects a relatively more positive performance in Turkish stock market with increased investor's confidence in the year 2015.