EU report sees strong recovery for Turkish economy

The EU Commission forecasts a strong recovery for Turkish economy in the after math of the crisis, in its European Economic Forecast report for spring of 2010.

EU report sees strong recovery for Turkish economy

The EU Commission forecasts a strong recovery for Turkish economy in the after math of the crisis, in its European Economic Forecast report for spring of 2010.

EU Commission's report forecasts Turkey to grow at 4.7% in 2010 and and at 4.5 % in 2011, the highest growth forecasts for Europe.

According to the Commission Turkish economy is making a strong recovery after a severe contraction in 2009.

The report says the global crisis hit the Turkish economy hard, and the GDP plunged 4.75% last year, following a 6% average annual growth rate between 2004-08.

It says with the impact of the global financial crisis fixed investment and external demand recorded a sharp decline.

The report points out however that thanks to fiscal and monetary stimuli, and a healthy banking sector, the impact of the crisis was minimised.

According to the Comission report the crisis highlighted Turkish economy's enhanced resilience to external shocks.

The Commission foresee a return to positive and robust annual growth in 2010. It expects low levels of capacity utilisation to impede investment, warning that export's growth might suffer from a more gradual recovery in Turkey's chief export markets, like EU countries.

"Therefore, a relatively robust recovery is expected. All components of domestic demand will show positive year-on-year growth in 2010, in large part due to strong base effects, reflecting the severity of the 2009 downturn," says the report.

The report says the labour market developments, credit growth, and consumer and business confidence pointed to a gradual recovery in consumption in 2010.

It says the unemployment rate has risen to 14% in 2009 from 11% in 2008, but started decreasing slightly in the first months of 2010.

The report says consumer and business confidence indices suggest a recovery in consumption was underway, but could take time.

The Commission expects recovery in investment to be somewhat stronger.

It expects inflation to remain at elevated levels in 2010 owing to base effects, higher commodity prices and the pass-through from administrative price adjustments as well as
excise tax hikes.

It says the food-price inflation constitutes an additional risk factor. "Against this backdrop, inflation is expected to be close to 8.5% by December 2010, exceeding the central bank's inflationary end-year target of 6.5%," says the report.

The report says the other major downside risk to the baseline scenario would be a renewed trend of global risk aversion, underlining that any major decline in investors? appetite for emerging market assets would cast a blow to Turkey?s recovery prospects.

It also warns against political risks that continue to lurk in the background.

"Any potentially escalating political tensions, which are not a part of the baseline scenario, pose a downside risk to the growth outlook," says the report.

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Last Mod: 06 Mayıs 2010, 11:53
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