World Bank cuts Turkey's end-2014 economic growth to 3.1%

In October, the World Bank projected Turkey’s end-2014 economic growth to be 3.5%.

Turkey’s GDP rose by 1.7% year-on-year at constant prices in the third quarter, after rising by 2.1% in the second quarter.

“However, the disappointing headline number is mainly due to a reduction in inventories with other components of domestic demand signalling improvements,” the World Bank said in its Turkey Regular Economic Brief last week.

The bank retained its 2015 GDP growth forecast for Turkey at 3.5% taking into account also the improved outlook for inflation and the current account due to a sharp decline in oil prices.

“Thanks to lower oil prices, Turkey will achieve significant external rebalancing in 2015 with the current account projected at 4.5% of GDP and inflation coming down to 6.7%,” said senior economist Kamer Karakurum Ozdemir.

However, Turkey is vulnerable to a change in investor sentiment and the room for monetary policy manoeuvre is consequently limited. Private consumption is expected to return to being the main driver of growth but political uncertainty and volatility in global markets will continue to weigh on investor sentiment, according to the World Bank.

The World Bank’s work in Turkey is based on a joint Country Partnership Strategy (CPS) for the period of 2012-2016 aimed at supporting Turkey’s transition to high income with financing of up to $6.45 billion (5.29 billion euro) during the five-year period, as well as with policy analysis and advisory services.

($ = 0.820 euro)