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Country Report Turkey July 2011

  • Publication Date:July 2011
  • Publisher:EIU
  • Product Type: Report
  • Pages:29

Country Report Turkey July 2011

Outlook for 2011-15

  • The Economist Intelligence Unit expects that the Justice and Development Party (AKP) government led by the prime minister, Recep Tayyip Erdogan, will remain in office throughout the forecast period.
  • Domestic resistance to reforms, notably to resolve the Kurdish issue and improve the judicial system, will continue to hinder Turkey's EU negotiations, as will the Cyprus issue and opposition in some EU states to Turkish accession.
  • Following a sharp rise in 2009, the budget deficit is expected to ease, despite some election spending in 2011, from 3.6% of GDP in 2010 to about 1.5-2% during 2011-15.
  • We expect the Central Bank of Turkey to start to raise its policy interest rates in the second half of 2011. Rates are expected to stay below pre-crisis levels as the inflation outlook seems fairly benign, despite higher food and oil prices.
  • After an expansion of 8.9% in 2010, growth is expected to slow to 6% in 2011 and 4.5% in 2012, before picking up to 5-5.5% a year in 2013-15.
  • The current-account deficit is expected to rise to 8% of GDP in 2011, before narrowing gradually to a still large 5-5.5% in 2014-15 as domestic demand growth moderates and commodity prices ease.

Monthly review

  • The AKP was the outright winner of the general election held on June 12th, securing a third consecutive term in government.
  • The AKP obtained 326 out of a total of 550 seats in parliament, meaning that Mr Erdogan will not be able to introduce a new constitution without the support of members of the opposition
  • The AKP's policy of "zero problems with neighbours", founded on increased trade links and fewer travel restrictions in the region, has been severely tested as turmoil in the Arab world has spread to its south-eastern border with Syria.
  • At its monthly meeting on May 25th the Monetary Policy Committee (MPC) of the Central Bank of Turkey decided to leave banks' reserve requirements and the short-term policy interest rate unchanged.
  • The government's finances have begun to benefit from a restructuring of income tax and social security premium arrears.
  • Industrial production growth slowed from 19% year on year in January to 8.3% in April. On a month-on-month basis, the calendar and seasonally adjusted index fell in the three months to April.
  • Consumer prices rose by an unexpectedly steep 2.4% month on month in May, causing the annual rate of inflation to surge to 7.2%, from 4.3% in April.

Source: Country Report

This report covers the following industry codes:
SIC Code: 53;59;2834;80;60;37
NAICS Code: 44;3254;62;52;336

  • Highlights
    • Outlook for 2011-15: Political stability
    • Outlook for 2011-15: Election watch
    • Outlook for 2011-15: International relations
    • Outlook for 2011-15: Policy trends
    • Outlook for 2011-15: Fiscal policy
    • Outlook for 2011-15: Monetary policy
    • Outlook for 2011-15: International assumptions
    • Outlook for 2011-15: Economic growth
    • Outlook for 2011-15: Inflation
    • Outlook for 2011-15: Exchange rates
    • Outlook for 2011-15: External sector
    • Outlook for 2011-15: Forecast summary
    • The political scene: Recep Tayyip Erdogan wins the election by a landslide
    • The political scene: The AKP loses seats; support for the CHP falls short of 30%
    • The political scene: In focus
    • Economic policy: Government waits to act on financial stability fears
    • Economic policy: Investor confidence in Central Bank's strategy declines
    • Economic policy: Public finances are to benefit from restructuring of claims
    • Economic policy: Highest bidders in power tenders are given extra time
    • Economic performance: Industrial output growth continues to slow
    • Economic performance: Consumer price inflation jumps in May
    • Economic performance: The lira, stocks and bonds have been under pressure
    • Data and charts: Annual data and forecast
    • Data and charts: Quarterly data
    • Data and charts: Monthly data
    • Data and charts: Annual trends charts
    • Data and charts: Monthly trends charts
    • Data and charts: Comparative economic indicators
    • Basic data
    • Political structure
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