IMF gives a bleak report on Turkey’s 2019 economic prospects

Turkey’s negative economic woes are bound to rage on unabated as the International Monetary Fund (IMF) has now revised the country’s growth rate.

This comes on the back foot of continued harsh criticism against the governing Justice and Development Party (AKP) on the way it rules the country. Some citizens have lashed as the lavish lifestyle of the party leaders and the wrong economic decisions that have been taken of late.

The latest, as in January 2019 World Economic Outlook Update report, titled A Weakening Global Growth, in which the 2019 and 2020 Gross National Product (GNP) of Turkey has decreased 0.2 and 0.1 respectively and the growth rate and prediction determined at 3.5 and 3.6.

Turkey impacted by what’s going on with neighbours

According to the IMF, main reasons of their projections on an economic decline stems from a new regulation put into place by Germany on automobile fuel standards, there are also concerns about Italy, where financial markets have been unsettled by government plans to expand spending.

On Turkey, there are also continued weaknesses in the country’s banking system. The decline is expected to be more severe than previous periods as Turkish citizens continue to feel the pinch of the lack of economic growth.

Economy not expected to grow

In the report, it is pointed out the Turkish economic growth will be more sluggish than previous predictions for 2019.

“Except the trade tension, as it is been in the US-China stand-off, there are many triggering factors which are predicted to cause worsening the risk perceptions and economic growth,” said the IMF.

Touching upon the potential triggering factors, the IMF warns of risks from no-deal Brexit with the European Union and more slowing economic growth in China than the previous growth predictions.

Blackened predictions on Venezuela, Turkey and Argentina

When compared with Venezuela and Argentina, Turkey’s economy is expected to contract with the two countries, but it is likely to be even more severe than previously expected.

All that said, the main global forecast of 3.5% does, nonetheless, still constitute a respectable increase in economic activity.

But the concern that it might not even reach that, is also realistically expected.

Turkey and Argentina’s worst currencies, according to Moody’s

On the other hand, Turkey and Argentina may have put their currency crises behind them but more woes await their economies in the coming quarters, according to Moody’s Investors Service.

“Declines in the Lira and the Peso, two of this year’s worst performers globally, will translate into sharp economic contractions as growth decelerates across advanced and emerging markets,” Moody’s said in a report.

Warning on current account deficit

Meanwhile, the external current account deficit looks set to stay above 5%  of GDP, the IMF predicted.

The IMF’s report indicated that despite strong partner growth and a recovering tourism sector, continued domestic demand strength and higher oil prices are expected to lead to a further widening of the current account deficit this year, with external financing needs remaining large.

Reserves remain relatively low, covering only around half of Turkey’s gross external financing needs.

“Vulnerabilities include large external financing needs, limited foreign exchange reserves, increased reliance on short-term capital inflows, and high corporate exposure to foreign exchange risk. Signs of possible oversupply in the building and construction sector are also emerging. While risk triggers are, by their nature, difficult to project, they could stem from domestic developments or regional geopolitical developments or changes in investor sentiment towards emerging markets,” it added.

Turkey’s refugee policy praised  

The IMF staff also noted Turkey’s generosity in hosting refugees serves as a “global example.”

“The introduction of work permits for those under temporary protection is very welcomed by the staff, recognising that the informal sector has been one of the main modes of employment for refugees. To ensure further formal labour market integration of refugees, the application process for work permits and business creation could be simplified further,” the statement noted.

Empty election promises won’t help Turkish economy: Top businessman

The post IMF gives a bleak report on Turkey’s 2019 economic prospects appeared first on IPA NEWS.

from IPA NEWS https://ipa.news/2019/01/22/imf-gives-a-bleak-report-on-turkeys-2019-economic-prospects/