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Turkey maintains robust economic growth 25 novembre 2011

Posted by Acturca in Economy / Economie, Turkey / Turquie.
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The Daily Star (Lebanon)

November 25, 2011, p. 5

Bank Audi released Thursday a comprehensive report on the performance of the Turkish Economy and the future outlook of this country which looks very promising. This is the introduction of the report

Underlined by strong household consumption, robust fixed investment and mild net exports, the Turkish economy is reporting a healthy performance in 2011, though relatively slowing down from the track record of high growth of the past year.

According to recent IMF estimates announced in its World Economic Outlook, real GDP forecast is set at 6.6 percent in 2011, against 8.9 percent in 2010 though higher than the average 4.1 percent real growth of the past five years.

But after output reached levels above its pre-crisis peak in the early months of 2011, the economy has lost some momentum, in tandem with the global economy and also as a result of domestic policy tightening.

As the recent adverse external shocks have generated a net slowdown, Turkey’s central bank has responded by easing policy in an attempt to avoid more serious output losses.

The policy interest rate cuts and the large widening of the external deficits created pressures on the Turkish lira which depreciated by 18 percent year-to-date amid weakening capital inflows, thus calling for raising rates.

Still, it is worth mentioning that while inflation had accelerated in 2010 reaching 8.6 percent, it cooled down this year, with the most recent IMF forecast putting it at 6 percent, a relatively low level by historical standards.

At the public finance level, the head-line fiscal balance continues to improve, returning public debt to GDP to a downward path.

As a matter of fact, the country’s fiscal deficit contracted from 5.6 percent of GDP in 2009 to 2.9 percent in 2010 and to 0.9 percent this year as per recent IMF forecasts. Likewise, after debt to GDP retreated from 46.1 percent in 2009 to 42.2 percent in 2010, a further improvement is set for this year, as it is expected to close 2011 at 40.3 percent.

Amid the worsening sovereign debt problems in the eurozone, key policy makers showed a great deal of self confidence about Turkey’s conduct.

Turkey’s external position is the weakest element in its credit profile. The country’s exports to imports ratio fell to below 55 percent over the first nine months of 2011, its lowest level in more than a decade, within the context of relatively weakened demand conditions in Turkey’s trading partners.

The current account deficit is expected to reach 10.3 percent of GDP this year and to exceed 40 percent of current account receipts.

The net external debt of the financial sector has risen quite sharply from 6 percent of current account receipts at the end of 2008 to 42 percent this year.

The central bank’s gross foreign exchange reserves amounted to $88 billion in September 2011, the equivalent of 18.2 percent of money supply, a relatively low level by international benchmarks (an average of close to 30 percent for developing economies at large).

At the banking sector level, the well-capitalized sector with little direct exchange rate exposure and primarily local deposit funding, together with long foreign currency positions, allowed Turkey to withstand the recent global deleveraging and economic crisis and exchange rate fluctuations.

With an average 16 percent capital adequacy ratio against a regulatory requirement of 12 percent, banks sizeable capital buffers were seen as capable of absorbing a short-lived macroeconomic shock.

Leverage is persistently low and the funding base is robust, with deposits accounting for about two thirds of total balance sheet size. Asset quality is very satisfactory, with strong credit expansion and sound output growth reducing the non-performing loans to total loans ratio to 2.7 percent by September, down from 3.7 percent at the end of December 2010.

At the capital markets level, a relative volatility was reported this year. The ISE share price index actually fell by 24.9 percent over the first nine months of 2011 contracting the average Price to Earnings ratio to 12.7x at end-September 2011.

The contraction in Turkey’s equity market was realized over a period of intense trading, with the stock market annualized turnover as a percentage of market capitalization reporting around 200 percent, a historical record high.

The five-year Credit Default Swaps, a measure of the market perception of debt risk, widened by 91 basis points year-to-date, from 142 basis points at end-2010 to 233 basis points at end-September 2011.

The in-depth developments in the real sector, external sector, public sector and financial sector of the economy are detailed in the forthcoming sections of Bank Audi’s report. The concluding remarks are left to the outlook of the Turkish economy looking ahead, given the status of current strengths and weaknesses, along with upcoming opportunities and threats.


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