International credit rating agency Moody’s has stated in its global macroeconomic outlook report 2018-19 that it has revised its real GDP growth forecasts for Turkey to 2.5 percent in the current year and 2.0 percent in 2019 from its previous forecasts of 4.0 percent and 3.5 percent, respectively, after 7.4 percent growth in 2017.
Moody’s stated that it was previously expecting the economy to slow as a result of cyclical factors and the easing of fiscal and monetary stimulus. Although new stimulus measures have been announced, including a reduction in foreign reserve requirements for commercial banks, financial conditions have tightened considerably. Turkey’s lira came under greater pressure than other emerging market currencies over the last few weeks, with the delayed policy response from the central bank exacerbating the fall. The inflation rate started to rise again in April, reaching 10.9 percent, and will increase further as a result of currency depreciation and higher oil prices. According to the credit rating agency, all of these factors will weigh on private consumption, business investment and ultimately overall growth in the second half of this year.
Meanwhile, the Organization for Economic Co-operation and Development (OECD) has also revised its GDP growth forecasts for Turkey to 5.1 percent in 2018 and 5.0 percent in 2019, from its previous respective forecasts of 5.3 percent and 5.1 percent. The OECD stated that, following a strong recovery in 2017 and turbulence in spring this year, Turkey’s economic growth is set to slow and added that the uncertainties surrounding the early elections in June, as well as persisting regional geopolitical tensions, create risks.