Turkey’s economic future under the spotlight

Partly because of its successful management of Turkey’s economy, the ruling AK Party looks set to retain power in Sunday’s elections, but there are also worries among investors that it is growing too strongly and is in danger of overheating.

Turkey’s GDP grew 8.9 percent last year and probably expanded by just over 10 percent in the first quarter of this year.

The Organisation for Economic Cooperation and Development estimates growth this year will be 6.5 percent and inflation 5.7 percent, though prices have accelerated recently. Turkey’s unemployment rate is 10.6 percent, slightly above the euro zone average.

The Chief Economist with JP Morgan in Istanbul told euronews: “The Turkish economy has passed through an important structural transition. Monetary and fiscal policies have been disciplined. However, there are, of course, some risks. There has been a great increase in the country’s current account deficit and also some of the recent policies of the central bank have brought some risks.”

The central bank has left interest rates comparatively low – they are currently at a record low 6.5 percent – and has increased the amounts Turkish banks must keep in reserve. That is intended to slow economic growth, but there is no sign so far that it is working.

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