Turkey Set To Continue Moderate Growth, IMF Says

(RTTNews) - Turkey's economy is likely to grow at a moderate pace on public sector support, exports and a mild revival of private spending, the International Monetary Fund said late Friday.

For 2014, gross domestic product is forecast to grow at 3 percent. However, the lender said future economic performance will be weaker than that of the recent past without a change in policies.

On current policies and national saving rates, growth is forecast to slow to around 3.5 percent per year in the medium term.

The lower growth rate would likely limit inflation and the deterioration of the current account deficit. Nonetheless, it would also mean that Turkey's income convergence with advanced economies would be slow, potentially leaving Turkey in a middle income trap.

According to IMF, the main risk to the outlook is a sharp decrease in capital inflows. The longer imbalances are allowed to increase, and the slower the authorities are to create additional policy space to respond to shocks, the more costly such adjustments will become.

In the near term, the macroeconomic policy mix has to play a bigger role in rebalancing the economy and addressing imbalances. A tighter fiscal stance would help to reduce the external imbalance, and relieving pressure on monetary policy, the IMF noted.

The lender stressed that the monetary stance needs to be consistent with the inflation target.