Turkey Premier Promises Stability in 2016 Amid Global Turmoil

  • Economy to grow 4.5 percent this year, outperforming rivals
  • Davutoglu's optimism comes as World Bank revises up forecast

Turkey is well-placed to outperform its emerging market peers as it moves on from a period of political instability marked by two general elections last year, according to the country’s prime minister.

While Turkey hasn’t escaped the global financial market jitters seen at the start of 2016, its economy will grow at 4.5 percent this year, Prime Minister Ahmet Davutoglu said in a speech to investors at Bloomberg’s European headquarters in London. The economy will be able to withstand challenges, including the spillover from war in neighboring Syria that’s led to terrorist attacks in Turkey’s major cities in recent months, he said.

"In spite of two elections, in spite of the instability around us, in spite of terrorist attacks by Daesh and the PKK, our economic growth continued and in the third quarter of this period of instability our economy grew 4 percent," Davutoglu said, using an alternative name for Islamic State and referring to the autonomy-seeking Kurdish group PKK. "After the Nov. 1 vote, we have an era of four years’ stability, so we can make projections, we can make reforms, we can establish a strong base for future economic plans."

The prime minister’s bullish outlook comes after Turkey’s currency plunged 23 percent in the past year, amid a broader emerging market sell-off and as violence between Turkish troops and Kurds in the country’s southeast spiraled. Even so, the World Bank on Monday said it had revised up its estimate for Turkey’s 2015 growth to 4.2 percent. The Turkish economy is expected to outperform every major economy except India, China and Indonesia in 2016, according to a Bloomberg survey.

Beneficial

Some of the trends which have spooked global investors should work in Turkey’s favor, Davutoglu said. As a net energy importer, the oil and commodities rout helps the economy, though the lira’s depreciation and higher food prices have pushed inflation higher than expected to 8.8 percent, he said.

The government is focusing this year on anti-inflation measures and lowering the current account gap, which has long been a key concern for Turkey’s economy, Davutoglu said.

“Based on comments from Prime Minister Davutoglu and Finance Minister Simsek, Turkey is an oasis of stability in a fairly volatile region,” Piotr Matys, a strategist for emerging-market currencies at Rabobank in London, said in an e-mail. “The most important message was that when the external backdrop improves, the Turkish lira has the potential to recover its losses.”

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