Jul 16 2018

IMF lowers growth forecast for Turkey

The International Monetary Fund has lowered Turkey’s growth forecast for 2018 by 0.2 points to 4.2 percent amid concerns about inflation and imbalances, and as signs indicate uneven global growth over the next year.

The IMF’s July 2018 World Economic Outlook report cited Turkey alongside Argentina as emerging markets who were forced due to “imbalances” to raise interest rates – a contentious issue in Turkey, whose President Recep Tayyip Erdoğan has discussed his opposition to rates hikes.

The report also used Turkey as an example of countries whose economies had tightened due to large external deficits, noting that Turkey’s growth rate is likely to drop significantly from the 7.4 percent registered in 2017 to 4.2 percent this year.

That growth rate puts Turkey just behind the 4.3 percent predicted by the IMF for Emerging and Developing Europe.

Last week IMF spokesperson Gerry Rice warned that Turkey must ensure "full operational independence" for its central bank, which many analysts fear has become tied to the will of President Erdoğan.

A report released by the IMF in May set out a list of reforms required to maintain growth in the country.

The IMF report warned that, globally, the balance of risks has “shifted further to the downside,” largely due to U.S. President Donald Trump’s threats to enter trade wars with China and his country’s traditional allies, and added that “(t)ighter financial conditions could potentially cause disruptive portfolio adjustments, sharp exchange rate movements, and further reductions in capital inflows to emerging markets, particularly those with weaker fundamentals or higher political risks.”