October 13, 2015•Update: October 13, 2015
ANKARA
The World Bank has raised its growth forecast for Turkey after a surprising surge in investment supported unexpected growth in the second quarter of 2015.
The bank is now forecasting 3.2 percent GDP growth this year, accprding to its report on Turkey released on Tuesday.
Turkey’s growth forecast for 2015 was 0.2 percentage points higher than in the previous forecast in July.
The Turkish government's most recent growth forecast for 2015 was 3 percent, as stated in the Medium-term Economic Program.
The report said that the faster GDP growth in the second quarter of the year leads to revising up growth forecast to 3.2 percent for 2015.
The World Bank has said it would stick to its 3.5 percent growth forecast for 2016 and 2017.
"Private and public consumption continued to lose momentum as expected but, private investment unexpectedly surged and became the main driver of growth- an indication that the private sector front-loaded investment spending before the June election or realized previously postponed investment, anticipating elimination of uncertainties after the election," the report said.
The bank warned that economic activity is expected to decelerate in the second half of 2015 against the backdrop of continued political uncertainty.
The bank predicted that inflation will be at 7.5 percent by the end of the year, up from 7 percent in the previous forecast due to rising food prices and the devaluation of the Turkish lira.
The bank also warned about political stability and structural reforms.
"Turkey`s current account deficit remains high and is unlikely to fall below 5.5 percent without significant structural reforms, given the current external environment. Meanwhile, net financial inflows to Turkey dropped since May 2013, and normalization of global monetary policies will make the competition for foreign funds fiercer among developing countries with higher costs. “There is an urgent need for political stability and to return to implementing the structural reform agenda to restore investor confidence, address vulnerabilities and lift growth."
Turkey is holding a snap election on November 1 after coalition talks failed.
