Turkey to expand by 3.2% y/y in 2015

The Turkish economy has been showing clear signs of slowing over the past couple of years but falling energy prices and the decelerating CPI are yielding better prospects for 2015-16. 

Industrial production surprisingly fell 2.2% y/y in January 2015, with mining and durable consumer goods production shrinking the most. In December 2014, it expanded 2.5% y/y (revised) from a 0.7% y/y increase a month earlier. On the other hand, consumer confidence remains strong.

Danske Bank notes its forecasts as follows:

• We expect the economy to expand by 3.2% y/y in 2015 (previously 2.8% y/y). Lower oil prices are set to reduce the large Turkish current account deficit significantly. However, political risks and less appetite for emerging markets assets due to expectations of a Fed rate hike may weigh on Turkish macro in 2015.
  
  
• The unemployment rate has been climbing since May 2014, posting 10.9% in December 2014 but we expect a steady decline in unemployment this year as prospects look supportive for Turkish exports and domestic demand.