Turkey to lead global recovery as it regains confidence

Having raised its growth forecast for Turkey in a "World Economic Outlook" report released on Wednesday, the IMF has predicted that the Turkish economy will grow by 5.2 percent in 2010, higher than the 3.7 percent forecast in its October report. This figure exceeds previous growth estimates by the government, which had earlier said in a medium-term economic program that they expected the Turkish economy to grow by 3.5 percent in 2010 over 2009.

The IMF joins the World Bank in its revision of forecasted growth in the Turkish economy for this year. The World Bank earlier announced it expected the Turkish economy to grow by 5 percent in 2010, above its previous expectation of 3 to 4 percent.

“Turkey has already recovered from the initial external shock and capital flows and trade are returning to normal,” the fund’s report said. The IMF predicts, however, that the Turkish economy’s growth could slow down to 3.4 percent in 2011 in line with global developments. “In emerging Europe, growth prospects vary widely. Economies where domestic confidence has already recovered from the initial external shock [Turkey] are projected to rebound more strongly, helped by the return of capital flows and the normalization of global trade,” the IMF report read.

Along with high expectations for a strong recovery in the Turkish economy, the fund’s report also maintains some reservations. According to the report, inflation rates remain high in Turkey. Inflation will average 9.7 percent in 2010, compared with 6.3 percent last year, the IMF says. The average rate in 2011 will be 5.7 percent, it said. The current account deficit will widen to 4 percent of gross domestic product (GDP) this year from 2.3 percent in 2009, the fund adds. The previous forecast for the 2010 deficit was 3.7 percent of GDP.

Speaking to Today’s Zaman, İstanbul Chamber of Industry (İSO) President Tanıl Küçük said it is significant that the IMF expects even higher growth for the Turkish economy in than the government’s previous forecast. “As we leave the first quarter of 2010 behind we see that both industry and export indices herald the Turkish economy enjoying a strong comeback from the 2009 turbulence.  Now it is time to concentrate on additional measures to accelerate the current recuperation process,” he stated.

Sharing his views on the latest IMF report with Today’s Zaman, İstanbul Chamber of Commerce (İTO) Chairman Murat Yalçıntaş said Turkey has enough capacity to grow further in the years to come, underlining that maintaining political stability was a key factor to achieving this. Yalçıntaş said the latest positive developments in economy to attract increased foreign direct investment (FDI) to the Turkish market also helped to address the unemployment problem.

Mustafa Koç, the CEO of Koç Holding, one of Turkey’s leading conglomerates, said on Wednesday that Turkey could experience “an unprecedented rate of growth” should the government maintain its reforms as part of EU harmonization process and the necessary FDI is obtained.

Things already on track in economy

The Turkish economy started accelerating in the final quarter of 2009. Figures propelling Turkey’s exit from the crisis followed one after another, bringing some zeal to the ailing domestic markets. A recent data had shown that Turkey’s economy shrank by 4.7 percent in 2009, less than the government’s estimate of 6 percent, with the economy returning to safe waters with a growth of 6 percent growth in the fourth quarter of 2009 over the same months of 2008.

In other signs indicating the Turkish economy’s multifaceted growth out of the crisis, the worst since the Great Depression, industrial production in Turkey increased by an impressive 18.1 percent in February over the same month of the previous year and was up by 0.5 percent from January. Adding further to the ongoing recovery, the country grew its exports by 34 percent in March over those of a year ago. Turkish consumer confidence inched up in March for the fourth consecutive month to 84.74, the highest in nine months. The main index of the İstanbul Stock Exchange (İMKB) reached a historic record of 59,330.34 on April 14. Only a week after the growth rates were announced, Economy Minister Ali Babacan said the government is considering raising the 2010 growth target in June, when the government updates its medium-term economic plan.

China, developing nations to outperform US, Europe

The IMF says many economies have resumed a high rate of growth, but challenges remain. Among advanced economies, the United States is expected to outperform Europe and Japan, but it will lag behind China and other developing nations. The fund notes that emerging markets such as Brazil, China and India will help lead the global rebound.

According to the report, the average global economic growth will be around 4.25 percent in 2010 while the fund’s forecast for growth in world markets in 2011 remains at 4.3 percent, unchanged from its last forecast in January.

IMF chief economist Olivier Blanchard said on Wednesday that the world economy is at an important stage in its efforts to rebound from the global financial crisis.