10 March 2016•Update: 11 March 2016
By Gokhan Kurtaran
LONDON
Year-end growth estimations for Turkey have been upgraded to 3.5 percent from three percent in December last year, due to a better-than-expected economic performance, according to a chief economist at Fitch ratings agency.
Turkey received the largest upgrade to growth outlook among emerging economies such as India, China and South Africa, while all other received cuts to their 2016 growth forecasts.
Speaking to Anadolu Agency, Fitch Ratings Chief Economist Brian Coulton said that incoming data for 2015 indicates more economic momentum in the country.
Coulton pointed to the country's macroeconomic policy and strength in consumer spending.
"Incoming data for 2015 indicates more near-term economic momentum," Coulton said.
According to the chief economist, consumer spending is to be main growth contributor for the year, driven by a 30 percent hike in the minimum wage, lower oil prices and a fairly loose macro policy stance.
Fitch had affirmed Turkey's long-term foreign and local currency issuer ratings at "BBB-" and "BBB" respectively with a stable outlook.
The agency said that the country’s strong fiscal position, declining oil prices and falling current account deficit were the main drivers behind Turkey’s success of preserving its investment grade rating.
Fitch forecast Turkey to grow by 3.6 percent in the next year, Coulton noted.
Emerging economies benefit from fall in commodity prices
Among the larger emerging-market economies, India, Poland, Turkey and South Korea are all large net commodity importers and stand to benefit in real income terms from the fall in commodity prices, according to Fitch Ratings’ Global Economic Outlook report released on Monday.
The report said that the impact of Russian sanctions on Turkey would be gradually offset by deeper economic relations with Iran and a modest strengthening of the eurozone.
However, the agency warned that ongoing conflict and oil price-related stresses in neighboring trading partners will hamper Turkey's net trade.
"The new government’s reform agenda is focused on implementing pre-election promises in the short term, with major structural adjustments necessary to rebalance the economy planned over the medium term," the agency said.
Declining oil prices have had a significant positive effect on the current account deficit and inflation in Turkey. The current account deficit reached $2.22 billion in January, a decrease of $216 million compared to the same month last year, the country’s central bank said on Thursday.
The 12-month rolling deficit fell to $31.9 billion in the month from $42.9 billion in January of last year. Oil prices have fallen 65 percent since mid-2014, from $115 a barrel in June 2014 to below $30 per barrel in 2016 (now $40 per barrel) reaching their lowest level in seven years, and recording the most rapid decline since 2008.
Global economic growth will slow
The world economy will grow at its slowest pace since 2009, topping out at just 1.7 percent according to the agency's Global Economic Outlook.
The forecast is based on a weighted average of 20 advanced and emerging market countries.
"The investment slowdown in China and sharp expenditure compression in major commodity-producing countries continue to reverberate around the world economy," the ratings agency said.
For emerging markets, 2016 growth is now pegged at four percent, down from 4.4 percent in December with Brazil, Russia and South Africa seeing cuts on growth.
