Turkey to enjoy faster economic growth amid oil prices fall

Baku, Azerbaijan, Feb. 18

By Aygun Badalova - Trend:

The fall in oil prices means the Turkish economy will enjoy faster growth and lower inflation this year than in 2014, British economic research and consulting company Capital Economics believes.

"Turkish GDP grew by a meagre 1.7 percent y/y (year on year) in Q3 and our Tracker suggests that growth stayed weak in Q4. But the fall in oil prices should support the economy over the coming quarters," said the Capital Economics' report obtained by Trend.

The company said that lower energy prices have already fed through into weaker inflation, and Capital Economics' analysts expect the headline rate to edge down further over the coming months.

"This in turn will support consumer spending," the report said.

With inflation falling, and government pressure to ease policy building, the central bank looks set to cut interest rates further, analysts believe.

Nonetheless, the scope for substantial easing is limited, they said.

"First, inflation is likely to remain above target. Second, despite the fall in oil prices the current account deficit will remain a concern, meaning the lira will remain vulnerable to bouts of weakness. Finally, following a rapid expansion of debt in recent years policymakers will need to keep an eye on financial sector risks," the report said.

Analysts also believe that continued weakness in the euro-zone, combined with headwinds from the Middle East and Russia, will weigh on Turkish exports.

Capital Economics' analysts forecast Turkey's GDP growth at 2.8 percent this year and 3 percent in 2016.

Turkey's monthly inflation rate in December was down for the first time in 2014, hitting a 10-month low of 8.17 percent, calculated as a moving average of the past 12 months, the Turkish Statistical Institute recently announced.

Also, the current account deficit in the January to November 2014 period narrowed to $38.7 billion, a decrease of $18 billion, compared to the same period a year earlier.

A slump in oil prices from $110 to $50 per barrel is expected to halve Turkey's oil imports and further reduce the current account deficit and inflation in 2015.

---

Aygun Badalova is Trend Agency's staff journalist, follow her on Twitter: @AygunBadalova

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