Turkish economic growth will slow more than previously expected this year because of higher borrowing costs, a weaker lira and a sharp fall in private consumption, the International Monetary Fund said on Tuesday. In its latest World Economic Outlook report, the IMF forecast real gross domestic product growth of 2.3 percent this year, rising to 3.1 percent in 2015. In its previous report last October it had predicted 2014 growth of 3.5 percent. "Growth in Turkey is expected to weaken in 2014 ... mainly as a result of a sharp slowdown in private consumption driven by macroprudential measures, the sizeable exchange rate adjustment and interest rate hikes," the report said. "The region as a whole will see slightly weaker growth in 2014 than it did in 2013, mainly on account of Turkey, whose economy is much more cyclically advanced than those of other countries in the region," it said. Turkey's economy grew 4 percent last year, official Turkish data showed at the end of last month. The government has an official forecast of 4 percent growth for this year. Turkey's central bank raised interest rates sharply at the end of January as it battled to defend the lira after it tumbled to record lows. The lira has since recovered and Prime Minister Tayyip Erdogan called last week for a rate cut, saying his AK Party's strong showing in recent local elections had boosted markets and lower rates would encourage investors. Central bank governor Erdem Basci hinted on Monday at possible interest rate cuts for the first time in a year, but added that they would be gradual and that the bank alone would decide on their timing. INFLATION SEEN PICKING UP The IMF also raised its forecast for consumer price inflation to 7.8 percent this year, up from a prediction of 5.3 percent in its October report. Inflation was expected to ease to 6.5 percent in 2015. The report said growth was led by private consumption in Turkey, unlike elsewhere in emerging Europe during the 2013 economic recovery where it continued to be driven by external demand. "The rise in private consumption reflected mostly pro-cyclical macroeconomic policies in Turkey," it said. "After an initial improvement, financial market volatility has increased since early fall in most countries. As a result, the region, excluding Turkey, experienced capital outflows," it said. The current account deficit, generally a weak point in the Turkish economy, was seen falling to 6.3 percent of GDP this year from 7.9 percent last year and was expected to decline further to 6.0 percent in 2015. http://english.ahram.org.eg/News/98604.aspx
