European Commission forecasts ‘political and policy uncertainty’ to fall in second half of 2017 following Turkish referendum
The European Commission on Monday forecast Turkey’s economy to grow 2.8 percent in 2017.
In its Winter 2017 Economic Forecast, the commission’s GDP outlook for Turkey in 2017 was 0.2 points lower than its previous estimate of 3 percent.
The commission also said it expected Turkey to expand at a pace of 3.2 percent next year, which is also 0.1 points lower than a previous estimate published in its Autumn 2016 forecast.
Monday’s report sees Turkey’s inflation at 8 percent in 2017 and 7.6 percent in 2018. The unemployment rate expectation of the commission was 11.2 percent for this year and 11.5 next year.
“Leading indicators suggest the economic headwinds are likely to continue in 2017. The depreciation of the lira may offer some relief by supporting export growth. Uncontrolled lira volatility, however, would pose a risk to the Turkish economy,” the report added.
However, the commission forecast Turkey’s economy to be back on track once “political and policy uncertainty reduce in the second half of 2017… after the referendum on the presidential system, private domestic demand will return to growth at a moderate pace”.
European recovery
The report shows a more optimistic view for recovery in the European Union, forecasting “all EU member states’ economies set to grow in 2016, 2017 and 2018”.
The Eurozone is set to grow by 1.6 percent in 2017 and 1.8 percent in 2018, according to the report. The commission sees the average growth rate in European countries reaching 1.8 percent in both 2017 and 2018.
Inflation in the Eurozone is forecast to reach 1.7 percent this year while it is expected to be at 1.8 percent across the EU as a whole. The next-year inflation expectation for the Eurozone is 1.4 percent in 2017 and 1.7 percent across the EU.
The unemployment rate in the Eurozone is forecast to fall to 9.6 percent this year, from 10.0 percent in 2016 and 9.1 percent in 2018.
“In the EU as a whole, unemployment is expected to fall from 8.5 percent in 2016 to 8.1 percent this year and to 7.8 percent in 2018. These are the lowest unemployment figures since 2009 but remain above pre-crisis levels,” the report said.
