Turkey's New Economy Forecast Shows Widening Gap With Analysts

Turkey issued a more optimistic forecast for its economy, widening the gap between the government’s and economists’ expectations.

The government raised its 2016 growth forecast to 4.5 percent from 4 percent as part of its medium-term economic program announced Monday, compared with a median estimate of 3 percent in a Bloomberg survey. It was more optimistic than economists on every measure for which Bloomberg conducts surveys, including the current-account gap and inflation.

In terms of accuracy, recent precedent has favored analysts over the government. Turkey recorded 7.6 percent inflation last year, compared with the government’s forecast 6.3 percent and a median estimate of just under 7 percent in a survey at around the same time. The government increased its prediction for this year by a percentage point to 7.5 percent on Monday -- that may still be too optimistic, said Finansbank AS economist Gokce Celik.

"Global liquidity conditions are likely to turn less supportive for emerging market currencies than they had been during this period and the bulk of the disinflationary support from lower oil prices has already materialized," Istanbul-based Celik said in a note to clients after the new targets were announced. "Taking these factors in to consideration, we find it very hard to share the government’s optimism, especially on the inflation front."

The medium-term program assumes diminishing political risks in Turkey, as well as improved trade and a recovery in the euro zone, Deputy Prime Minister Mehmet Simsek said in a televised presentation on Monday. Fighting between the government and autonomy-seeking Kurdish militants has reignited in the country’s southeast.

Inflation in 2015 was "way above target” despite a collapse in oil prices that has benefited Turkey, Simsek said. The government has missed its inflation target for the past five years.

The new forecasts weren’t all positive revisions. The government nearly doubled the size of its budget deficit forecast to 1.3 percent of gross domestic product.

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