5/6/2016
IMF Predicted Turkey's Annual Inflation as 9.8% in 2016
According to IMF's report regarding Central, Eastern and South-eastern European (CESEE) countries including Turkey: "Capital inflow to Turkey has recently become positive again, and financial sector benefited from investments. Private sector savings have remained below 13% since 2010, and decreased to 9% in 2013. Implementation of reforms, especially for retirement and severance payment, should start immediately."
International Money Fund (IMF) published the assessment report regarding Central, Eastern and South-Eastern European (CESEE) countries including Turkey. It was stated in the report that CESEE countries have continued growing despite low foreign demand, and unemployment rates decreased to levels before the financial crisis. It was indicated that expansionary monetary policies, improving financial condition and increasing prices play an important role in consumption-focused growth of the countries in the region, and investments continue to remain low. The following reports were included in the report, which states that the strong domestic demand will continue to support the growth of the countries in the region in the short term: "CESEE countries except Commonwealth of Independent States (CIS) –consisting of Russia, Ukraine, Moldova and Belarus– will grow by 3-4% in 2016. On the other hand, due to the decreasing oil prices and sanctions, Russian economy shrank sharply last year. Other CIS countries got harmed by the decrease of demand in Russia, in addition to political and financial difficulties". It was also expressed in the report that downward risks in Central, Eastern and South-Eastern European region have become more significant. Stating that fluctuations are caused by low growth rates in the Euro Zone, USA and rising markets as well as tightening global financial conditions, the report reads, "Moreover, political uncertainties and instabilities have increased throughout the region. While CESEE countries move towards rough waters, policies should continue supporting the economy". "Countries in the region should be prepared against negative shocks" The IMF report pointed out that countries in the region should be prepared against negative shocks, and the first instrument to be used in such cases is monetary policies, while advising them to resort to financial precautions where applicable. It also emphasized the requirement to give precedence to growth-friendly reforms to improve labour market and investments, and the great importance to increase savings. "Capital inflow to Turkey has become positive again" In the report's section related to Turkey underlined that inflation in Turkey continues to be high, and it was predicted that annual Consumer Price Index (CPI) will be at the level of 9.8% in 2016. IMF's previous prediction was that CPI would decrease to 7.9% this year. On the other hand, the report indicates that capital inflow to Turkey has recently become positive again, and financial sector benefited from investments. On the other hand, it was stated that saving rates continue to be low, and the following assessment was made: "Private sector savings, which were at the level of 18% in 1998-2003 period, have remained below 13% since 2010, and decreased to 9% in 2013". The report pointed out that the decrease in savings stemmed from macro-economic balancing policies to a great extent, while urbanization might have contributed. The IMF Report reminds that the Turkish government has taken action to increase the low rate of savings, and recommends that implementation of reforms, especially for retirement and severance payment, should start immediately.
Annual Report
