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Country Risk Service Turkey August 2012

  • Publication Date:August 2012
  • Publisher:EIU
  • Product Type: Report
  • Pages:25

Country Risk Service Turkey August 2012

Overview

The Economist Intelligence Unit expects the ruling Justice and Development Party (AKP) to remain in office until the next general election in 2015, and probably beyond. Resolving the Kurdish issue, introducing a civilian-friendly constitution and dealing with the threat of conflict with Syria will be the AKP's biggest challenges. Turkey's EU accession talks will make little progress. We expect the budget deficit/GDP ratio to remain around 2% in 2012-16. GDP growth is forecast to slow from 8.6% in 2011 to about 3% in 2012, before picking up to more balanced growth of 4% in 2013 and 5% a year in 2014-16. The current-account deficit will narrow owing to weaker domestic demand growth, but it will still be large. Turkey's heavy dependence on capital inflows to meet its external financing needs will leave the economy vulnerable to global risk appetite, especially given Turkey's trade and investment links with the crisis-hit euro zone.

Key changes from last month

Political outlook

On July 17th the congress of the main opposition Republican People's Party (CHP) re-elected its reformist leader, Kemal Kilicdaroglu, as chaiman. Although the CHP's image may be improving, it is still unable to appeal to a broader number of voters and to demonstrate the benefits of its renewal to the electorate. We therefore continue to expect the AKP to remain in government beyond the general election in 2015.

Economic policy outlook

As we expected, the Central Bank of Turkey resisted pressure to ease monetary policy in July. We continue to believe that the Bank will remain cautious, constrained by concern about Turkey's still-large current-account deficit and deteriorating external conditions.

Economic forecast

Industrial production data for May suggest that economic activity in the second quarter was stronger than expected. Although we have revised our 2012 real GDP forecast upwards, to 3.2% (3% previously), we continue to expect a sharp slowdown in the second half of this year.

This report covers the following industry codes:
SIC Code: 60
NAICS Code: 52

This report covers the following industry codes:
SIC Code: 60
NAICS Code: 52

Please Note: Due to the Nature of This Report The Toc is Not Available

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