Risk Factors in the Economy

• 04.09.2014
• Archive

As we complete the first half of 2014, we see that the recovery process in the world economy is still continuing, but the growth is following a weak and fluctuating course.

FED has been trying to support this recovery process by delaying its exit from monetary expansion, while European Central Bank has been providing a more explicit monetary support. In summary, due to the inadequacy of lasting solutions and structural changes, the fate of the world economy is still determined under the shadow of central banks.

As uncertainties subside in the world economy and risks around us increase, Turkish economy displays a relatively positive outlook as of the first half of the year.

While the economy made a strong start with 4.3% growth in the first quarter, Turkish economy reaches a new balance that can be summarized as “from domestic demand to foreign demand”.

As export numbers are increasing relatively strongly, import is contracting as expected, and the drop in current account deficit is continuing thanks to the positive contribution of foreign trade deficit, which is the main determinant of the current account deficit. We see that the inflation that surpassed the expectations by almost twofold in May, started to decline as of June. However, in July, we see again a tendency to increase.

Data compiled for the first half of the year and expectations for the second half; indicate that it is reasonable to make a growth estimate of around 3.5% for 2014. The revision of growth estimates, which were around 2% at the beginning of the year, to higher rates, is certainly a positive development for our economy.

However, indicators such as the fact that the current account deficit is still high even though it shows a tendency to contract, inflation cannot be decreased at the expected rate, unemployment is stuck in a 9-10% range show that the “quality” issue of the growth has still not been resolved.

Towards the end of this year, the possibility that FED’s schedule to increase interest rate will be clarified, probable developments that may affect the recovery in Europe, and internal and external political uncertainties should be monitored carefully in the second half of the year, as main risk factors for Turkish economy.

Our country has left behind Presidential elections that were carried out in a democratic and peaceful atmosphere. Following the elections, 62nd Government was built and took office. We hope that the election results and the new government will be good for our country and our nation, and wish that the economy have more weight in the agenda…

Erdal Bahçıvan
Istanbul Chamber of Industry
Chairman of the Board