Turkey sees slower GDP growth in second half of 2016: World Bank

As private investment and consumption appear to have slowed down in the aftermath of the failed coup attempt, high frequency indicators suggest real GDP growth may fall into negative territory in Turkey in the third quarter, which will bring full-year GDP growth in 2016 to 3.1 percent, compared to 3.5 percent envisaged earlier, said the World Bank in a note on Nov. 25. 

"The recent geopolitical developments have increased domestic uncertainty and weakened business confidence," said Johannes Zutt, World Bank Country Director for Turkey. 

"We project GDP growth to rebound to 3.5 percent in 2017, as the removal of Russian sanctions enables net exports to improve. That said, private investment is likely to remain weak in 2017, though structural reforms aiming to rebuild business confidence and improve the investment climate should gradually help to raise private investment in the medium-term," he added. 

"The current account deficit is likely to rise in 2016, as tourism revenues fall," said Donato De Rosa, World Bank Lead Economist for Turkey. 

"Foreign arrivals to Turkey dropped sharply in 2016 on the back of Russian sanctions and security concerns, which curbed flows from Russia and Europe. The rebound of global oil prices since early Q1 will show its negative impact with a lag, increasing the energy deficit in 2017," added De Rosa. 

The note underlines that volatility in financial markets has increased due to global and domestic factors. 

"Since September, volatility has increased further, reflecting a weak global outlook, an expected interest rate increase in the United States, slower domestic growth, a widening external deficit, and an accommodative macro policy mix. Moreover, in late September, Moody`s cut...