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Turkey Country Risk Report Q1 2019

Turkey Country Risk Report Q1 2019

The Turkish economy looks set for a sharp slowdown, as rising inflation and a more restrictive domestic and external financing backdrop prove headwinds to growth

As inflationary pressures remain elevated, businesses will see profit margins squeezed and domestic demand growth will fade over the coming quarters

The current account and budget deficits will be reduced as the economy reduces its dependence on external financing

Public debt will likely rise over the coming years, as the government is forced to take on private sector and state owned enterprise debt

Following the June 2018 presidential and parliamentary elections, President Recep Tayyip Erdoğan will have more control over Turkey's institutions and the management of the economy

Turkish nationalism and anti-American sentiment will become more prominent, as Turkey moves further from the secular vision of the Republic's founder, Mustafa Kemal Ataturk

Turkey's relations with traditional Western allies will continue to deteriorate in the years ahead, as the former drifts in an increasingly independent direction In particular, tensions with the US will remain, given a number of disputes

Key Risks

The major risk to Turkey's macroeconomic trajectory in the coming years stems from its large 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, which becomes more likely as the US Federal Reserve continues its tightening cycle

The Turkish lira remains vulnerable and further political or economic shocks could lead to a further sell-off in the unit, raising external financing costs

A deterioration in Turkey-US relations could see harsher sanctions imposed on Turkey and Turkey's NATO membership in doubt

The banking sector will face rising non-performing loans and may face reduced capital buffers and higher funding costs Turkey Country Risk Q1 2019


Executive Summary
Core Views
Key Risks
Country Risk Summary
Economic Risk Index
Political Risk Index
SWOT
Economic – SWOT Analysis
Political – SWOT Analysis
Economic Outlook
Economic Growth Outlook
Downside Risks Easing As Turkey Heads Into A Recession
GDP By Expenditure Outlook
TABLE: GDP GROWTH FORECASTS
TABLE: PRIVATE CONSUMPTION FORECASTS
TABLE: GOVERNMENT CONSUMPTION FORECASTS
TABLE: FIXED INVESTMENT FORECASTS
TABLE: NET EXPORTS FORECASTS
External Trade And Investment Outlook
Turkey's External Position To Remain Precarious In 2019
Outlook On External Position
TABLE: TOP 5 GOODS EXPORTS & IMPORTS IN 2016
TABLE: CURRENT ACCOUNT BALANCE FORECASTS
TABLE: CAPITAL & FINANCIAL ACCOUNT BALANCE
Monetary Policy
CBRT To Begin Easing Cycle, But Premature Cuts A Risk
Monetary Policy Framework
TABLE: MONETARY POLICY FORECASTS
Fiscal Policy And Public Debt Outlook
Turkey's 2019 Budget Deficit To Overshoot
Structural Fiscal Position
TABLE: MAIN REVENUE & EXPENDITURE CATEGORIES
TABLE: FISCAL AND PUBLIC DEBT FORECASTS
Turkey Country Risk Q1 2019THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings’ Credit Rating. Any comments or data included in the report are solely derived from Fitch Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.ContentsCurrency Forecast
TRY: Lira Rebound To Fade
10-Year Forecast
The Turkish Economy To 2027
Shine Coming Off Growth Story
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Political Outlook
Domestic Politics
Turkey's NATO Membership Intact For Now, But Long-Term Exit Risks Rising
Operational Risk
TABLE: OPERATIONAL RISK
Economic Openness
TABLE: FREE TRADE AGREEMENTS
TABLE: TARIFF AND NON-TARIFF TRADE BARRIERS
TABLE: FREE TRADE ZONES AND INVESTMENT INCENTIVES
TABLE: BARRIERS TO FDI
Utilities Network
TABLE: ELECTRICITY RISKS
TABLE: FUEL RISKS
TABLE: TELECOMMUNICATIONS RISKS
TABLE: WATER RISKS
Global Macro Outlook
Continued Growth Divergence And Policy Risks Ahead
TABLE: GLOBAL ASSUMPTIONS
TABLE: DEVELOPED STATES, REAL GDP GROWTH, % y-o-y
TABLE: EMERGING MARKETS, REAL GDP GROWTH, % Y-O-Y
Index Tables
TABLE: TURKEY – MACROECONOMIC DATA AND FORECASTS

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