1. Market Research
  2. > Automotive
  3. > Motor Vehicle Market Trends
  4. > Turkey Business Forecast Report Q2 2014

Turkey Business Forecast Report Q2 2014

  • March 2014
  • -
  • Business Monitor International
  • -
  • 48 pages

Core Views

Although we believe Turkey has strong long-term growth potential, our real GDP growth forecasts remain well below consensus in 2014 and 2015. Tightening global liquidity conditions and rising domestic interest rates will stifle investment and credit growth, an important driver of the Turkish economy. Political instability and social tensions will remain elevated in the run-up to general elections in 2015, further weighing on business and consumer confidence. With relatively healthy budget and debt dynamics, the government is in a position to provide a more pronounced fiscal boost to the economy. However, we expect fiscal discipline to remain relatively high on the government's agenda.

While the government's debt load is low by regional standards, the private sector's rampant external borrowing in previous years has greatly increased macroeconomic risks. After substantial widening of external imbalances in 2013, we expect Turkey's current account deficit to narrow only gradually in coming years owing to the country's dependence on imported energy. Turkey will remain reliant on short-term foreign capital inflows to cover the sizeable current account shortfall, leaving it prone to shifts in international risk sentiment and leaving open the potential for financing crises.

A major corruption scandal and increased incidences of popular protest have highlighted the fact that major political challenges still face the country over the medium term. In particular, the ruling Justice and Development Party will take an increasingly unilateral approach as it struggles to maintain support. We expect the party to face growing and more vocal public opposition, with the potential for further unrest. Moreover, Turkey faces a challenging foreign policy environment amid heightened regional tensions as the government attempts to cement its role as an economic and political power in the region.

Major Forecast Changes

We have revised down our 2014 real GDP forecast for Turkey on the back of tightening monetary conditions and our expectation for a less amenable global environment for emerging market growth. We now expect growth of 1.5% in 2014, from a previous forecast of 2.6%. Nevertheless, if the Turkish authorities are able to weather the rebalancing process and the challenging external financing environment over the next few quarters, the country's long-term growth story remains an attractive one. We now expect the general government budget deficit to come in at 2.7% of GDP in 2014, from a previous forecast of 2.2%, based on a deteriorating short-term growth outlook and our expectation that the government will look to support economic growth in the run-up to crucial elections in 2014 and 2015.

Key Risks To Outlook

The major risk to Turkey's macroeconomic trajectory stems from its external financing requirement. Turkey's large current account deficit and dearth of foreign direct investment inflows leaves the country vulnerable to external shocks and a major outflow of foreign capital. As such, while we see potential upside risks to our short-term forecasts should global risk appetite and demand for emerging market assets show a robust recovery, we believe risks are weighted primarily to the downside.

Table Of Contents

Turkey Business Forecast Report Q2 2014
Executive Summary 5
Core Views 5
Major Forecast Changes 5
Key Risks To Outlook 5
Chapter 1: Political Outlook 7
SWOT Analysis 7
BMI Political Risk Ratings 7
Domestic Politics 8
AKP Rift Exposes Deep Flaws 8
Political instability and social tensions will remain elevated in the run-up to general elections in 2015, when we cannot rule out Prime
Minister Recep Tayyip Erdo?an amending party rules to run for a fourth consecutive term. The adoption of increasingly authoritarian
measures to stifle opposition has damaged relations with the EU, with negative implications for Turkey's long-term investment climate,
and we expect a high degree of policy continuity as long as Erdo?an remains a leading figure in government.
TABLE: Political Overview 8
Long-Term Political Outlook 10
Structural Changes To Continue 10
Turkey's moderate Islamist Justice and Development Party (AKP) will continue to press ahead with reforms to the country's political and
social system for the foreseeable future. Although the AKP continues to enjoy broad popular support, there is growing and increasingly
visible opposition from the traditional secular establishment that threatens to trigger a wider backlash. In terms of foreign policy, we
expect Turkey to continue rebalancing its interests away from the West in favour of closer ties with the former Soviet Union and the
Middle East and North Africa.
Chapter 2: Economic Outlook 13
SWOT Analysis 13
BMI Economic Risk Ratings 13
Economic Activity 14
Well Below Consensus On Growth 14
In the context of tightening global liquidity and rising political uncertainty, Turkey's externally leveraged growth model will suffer in
the coming years as financial account inflows slow and domestic interest rates remain elevated in order to sustain demand for liradenominated
assets. We forecast real GDP growth of 1.5% and 3.0% in 2014 and 2015 respectively, well below consensus estimates of
2.3% and 4.0%.
Balance Of Payments 17
Energy To Keep External Deficit Wide 17
Despite a sharp slowdown in domestic demand, Turkey's current account deficit will remain uncomfortably high in 2014 at 6.0% of GDP
owing to relatively inelastic demand for imported energy. Turkey will continue to rely on short-term capital flows for external financing,
implying that the financial account will remain susceptible to volatility in global investor risk sentiment.
Monetary Policy 19
No Inflation Targeting In 2014 19
The Central Bank of Turkey will miss its inflation targets by a wide margin in 2014, implying a further loss of credibility as an inflationfighting
institution. However, a relatively hawkish stance will prevent the country from once again reaching the brink of a balance of
payments crisis.
Fiscal Policy 21
Growth To Trump Fiscal Consolidation In 2014 21
Fiscal discipline will take a back seat to supporting growth in 2014 as Turkey's ruling Justice and Development party struggles to
maintain popular support amid a corruption scandal. However, a decade of conservative fiscal management has left the government
with ample space for counter-cyclical spending in the coming quarters, with minimal damage to its sovereign profile.
TURKEY Q2 2014
Exchange Rate Policy 23
Rate Hikes Wont Halt Lira Slide 23
TABLE: BMI Turke y Currenc y Forecast 24
Chapter 3: 10-Year Forecast 27
The Turkish Economy To 2023 27
Convergence To Remain In Play 27
Although the Turkish economy will face challenges over the next several years, we retain a positive view on the long-term convergence
prospects for Turkey, with real GDP growth expected to continue outperforming the eurozone through to the end of our 10-year forecast
period. Key economic policy and institutional reforms in the medium term will be necessary to set the groundwork for productivity
gains beyond 2015. Significant risks will remain, however, especially as underlying social tensions between secularists and moderate
Islamists are unlikely to disappear in the next decade. This has contributed to our view that Turkey will not join the EU any time over our
forecast period.
TABLE: Long-Term Macroeconomic Forecasts 27
Chapter 4: Business Environment 29
SWOT Analysis 29
BMI Business Environment Risk Ratings 29
Institutions 30
Infrastructure 33
Market Orientation 35
Operational Risk 36
Chapter 5: Key Sectors 37
Autos 37
TABLE: Autos Production Data And Forecasts 37
TABLE: Autos Sales Data And Forecasts 38
TABLE: Autos Trade Balance Data And Forecasts 39
Food and Drink 40
TABLE: Food Consumpti on Indicat ors - Hist orical Data and Forecasts , 2011-2018 42
Other Key Sectors 45
TABLE: Freight Key Indicat ors 45
TABLE: Oil and Gas Sect or Key Indicat ors 45
TABLE: Pharma Sect or Key Indicat ors 45
TABLE: Telec oms Sect or Key Indicat ors 46
TABLE: Defence and Securit y Sect or Key Indicat ors 46
TABLE: Infrastructure Sect or Key Indicat ors 46
Chapter 6: BMI Global Assumptions 47
Global Outlook 47
Global Growth Optimism Turning To Disappointment 47
Table: Global Assumptions 47
Table : Devel oped States , Real GDP Growt H, % 48
Table : Emerging Markets , Real GDP Growth , % 49

View This Report »

Get Industry Insights. Simply.

  • Latest reports & slideshows with insights from top research analysts
  • 24 Million searchable statistics with tables, figures & datasets
  • More than 10,000 trusted sources
24/7 Customer Support

Talk to Veronica

+1 718 514 2762

Purchase Reports From Reputable Market Research Publishers
Seat Markets in the World to 2020 - Market Size, Development, and Forecasts

Seat Markets in the World to 2020 - Market Size, Development, and Forecasts

  • $ 26 587
  • Industry report
  • August 2016
  • by Global Research & Data Services

The expansion of the global seat industry is forecast to reach 4.4% p.a. in the coming years. Between 2009 and 2015 the market increased with an average annual growth of 5.2%. Currently, aircraft seats ...

Global Tire Market Forecast & Opportunities, 2021

Global Tire Market Forecast & Opportunities, 2021

  • $ 12 000
  • Industry report
  • August 2016
  • by TechSci Research

Global tire market witnessed tepid growth during 2011-15, predominantly due to Eurozone Crisis and slump in the crude oil prices. These factors led to weak demand for tires across Europe and Middle-East, ...

Seat Markets in Europe to 2020 - Market Size, Development, and Forecasts

Seat Markets in Europe to 2020 - Market Size, Development, and Forecasts

  • $ 12 755
  • Industry report
  • August 2016
  • by Global Research & Data Services

The report package Seat Markets in Europe to 2020 - Market Size, Development, and Forecasts offers the most up-to-date industry data on the actual market situation, and future outlook for seats in different ...


Reportlinker.com © Copyright 2016. All rights reserved.

ReportLinker simplifies how Analysts and Decision Makers get industry data for their business.