FYI
Nawaf Y. Husein
Faculty Member
Msc, CRP , CLBB
Saudi Training Society Member
Institute of Banking
Saudi Arabian Monetary Agency ( SAMA)
Dear readers,
The Turkish economy has continued to grow at a very robust pace during the year even in the face of mounting global economic uncertainty. Policy efforts to bring about a controlled slowdown have proven largely ineffective. Problematically, the rapid growth has materialized at the cost of mounting structural weaknesses, notably a widening current account deficit and a build-up of inflation. Moreover, Turkey's exposure to the troubled Euro-zone economy will likely weigh on growth in 2012.
· Growth has exceeded expectations but is likely to decelerate fairly sharply. Turkish growth this year, in spite of some slowdown in Q2-3, is still running at close to last year's record-breaking pace. Overall real GDP growth is expected to come in at some 8.3% this year. Going forward, however, the momentum is likely to wane partly due to a tighter policy bias at home but above all as a result of persistent economic weakness in Europe. We expect Turkish growth to decelerate sharply to 3.3% next year but the possibility of an even sharper correction cannot be ruled out.
· Points of weakness persist. Turkey stellar growth performance has gone hand in hand with persistent and indeed deteriorating imbalances in the economy. Inflationary pressures have risen sharply in recent months, although a large proportion of the increase should prove temporary. The current account deficit has reached some 10% of GDP and poses major risks of discontinuity due to a critical reliance on short-term funding in a fragile global economic environment.
· Monetary policy creativity. The Central Bank has struggled to convince the markets of its agenda seemingly made up of a number of partly conflicting policy objectives. Faced with persistent Lira weakness, it has in recent weeks tightened the monetary conditions quite sharply by means of major shift in interest rate policy. However, it has signaled potential flexibility against the backdrop of a highly uncertain global economic environment.
· Relations with the GCC offer considerable potential. Economic relations between Turkey and the GCC are intensifying rapidly, albeit from a generally modest base. A number of similarities and economic complementarities offer impressive potential for trade and investment and indications are mounting of rapidly growing interest on either side. However, as seen in 2009, trade flows are vulnerable to cyclical factors.
Regards,
Noel Rotap
Economics Department
The National Commercial Bank
No comments:
Post a Comment