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OECD: Turkey's growth rate to reach 6 pctPosted on 2008-09-16 17:37:16In its semiannual review of economic prospects for its 30 members, the OECD forecasted continued though limited economic growth for Turkey, a decrease in Turkey’s central bank rate and an increase in exports Istanbul- TDN with wire dispatches Turkey should post steady yet still below-trend growth this year and next, though the economy remains exposed to domestic and international risks, according to the Organization for Economic Cooperation and Development's latest forecasts. Turkey's gross domestic product should expand to 5.7 percent this year, down from 6 percent in 2006, but accelerate to 6.2 percent in 2008, the OECD said in its semiannual economic outlook published Thursday. While that's more than twice the pace of the growth expected for all 30 OECD countries – for which combined GDP is seen expanding by 2.7 percent this year and next – it is below Turkey's potential rate, which the OECD estimates to be above 7 percent per year. The country's current account deficit is slated to remain above 7 percent of GDP both this year and next, the OECD report stated. The OECD offered various warnings on Turkey's prospects. The general elections slated for July make the fiscal outlook uncertain. Turkey remains exposed to a continued international liquidity levels and investors' appetitefor risks. The OECD said it believes financial markets may be underpricing risk. Spreads on emerging market debt over U.S. Treasuries are near historical lows, although Turkey's higher interest rates offer more compensation than other emerging economies. Double-digit inflation is proving stickier than expected, suggesting that interest rates will decline more slowly than otherwise thought, said the OECD. Turkey's central bank currently has a policy interest rate of 17.5 percent. The OECD expects that to decline to 15 percent by the end of 2007 and to 12 percent by the end of 2008. Exports should accelerate to 8.8 percent this year after expanding to 8.3 percent in 2006, and should further accelerate to 9.1 percent in 2008. Imports are also expected to rise from 6.9 percent in 2006 to 7.1 percent in 2007 and to 8.1 percent in 2008. Gross fixed capital formation should grow 7.3 percent this year and 7.7 percent in 2008, down from 14.3 percent in 2006 and even faster rates in the two previous years. Government consumption is slated to expand quickly this year to 9.2 percent before slowing sharply to 4.5 percent in 2008. Private consumption should remain moderate at or below last year's 5.2 percent expansion rate for the next two years, down from faster rates in previous years, the OECD said. Turkey must assure further consolidation of its macroeconomic policy despite electoral temptations, the OECD said. Sustainable rapid growth also requires that the sprawling informal segment of the business sector continue to shrink, the organization added. Official unemployment remains high, at 9.9 percent in 2006 and higher in urban areas, while total employment is growing slowly, the OECD said. Long-term interest rates in Turkey should remain about 100 basis points higher than Turkey's central bank's short-term policy rates, according to the OECD's forecasts. That compares with flat yield curves for the richer OECD economies, including the U.S and the Eurozone. The OECD sees economic growth in the 13-nation euro zone and Japan eclipsing the United States for the first time since 2001, when the world's largest economy entered a brief recession. It also expects China's booming growth is expected to maintain its explosive pace. |
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