Ankara To Fall Short Of 2014 Growth Target

Ankara is unlikely to witness the growth expectations it forecast for this year, even after lowering the bar from 4 percent to 3.3 percent, according to a recently released research report from Bahçeşehir University's Center for Economic and Social Research (BETAM).

BETAM forecast that Turkey would only achieve 2.8 percent economic growth by year's end, expecting that fourth quarter growth would only reach 2 percent, a slight increase from the third quarter, where a disappointing 1.7 percent was recorded.

Drought was the determining factor in low growth this year in Turkey, according to BETAM. The extended dry spell dealt a severe blow to agricultural production, which subsequently caused prices to skyrocket. BETAM said that its initial growth forecast for the third quarter was 3.1 percent.

The research institute said in its report that developments between Russia, Ukraine and the EU are not positive for Turkey. The dramatic fall of the Russian ruble resulting from plunging global oil prices has resulted in investors fleeing the ruble. Major drops in exports from the EU to Russia due to the embargo resulting from sanctions imposed following the Crimea crisis are not beneficial to the EU. As Turkey is a major trade partner with EU member countries and Russia, it is affected negatively by such developments, said the report. It did note that the rapidly falling global oil prices would help decrease Turkey's current account deficit (CAD), as Turkey is almost entirely dependent on its neighbors for oil and natural gas imports.

2014 has been a disappointing year for Turkey's economy, as growth rates have failed to meet expectations, even following revisions. Unemployment rates have crossed the double-digit mark in recent months, and both non-agricultural and youth unemployment were higher than the overall rate. The lira recently plunged to all-time lows before recovering following a statement from the Central Bank of Turkey. The most recent figures from the Turkish Statistics Institute (TurkStat) show industrial production in Turkey declining on a month-on-month basis, a factor likely to have harmed the value of the lira.

Meanwhile, ratings agency Fitch said on Thursday that Turkish banks face a tough year in 2015. “Modest economic growth, competition for deposits and moderate asset quality deterioration will create a tough operating environment for Turkish banks in 2015, but solid capital and profitability buffers mean the outlook remains stable,” Fitch said in a report on Thursday.

(Cihan/Today's Zaman)