EU increases its growth estimates for Turkey

The EU Commission has increased its growth estimate for Turkey in 2015 from 3.3 percent to 3.7 percent, and from 3.7 percent to 4 percent for 2016. According to the report, inflation rates are expected to decline, while growth will be supported by improvement in consumer's purchasing power. Moreover, it is estimated that the current account deficit will also shrink, thanks to the reduction in imported energy.

Furthermore, the report noted that if there had been no decline in exports to Russia, Ukraine and Iraq, the general export performance and growth figures of Turkey would have been higher. The report indicates that while the Central Bank of the Republic of Turkey's (CBRT) tight monetary policies were in place in 2014, the low inflation figures in January 2015 as well as government pressure, especially from President Recep Tayyip Erdoğan, caused the CBRT to loosen its policies. It underscores that with the declining price of crude oil and loose monetary policies, that further growth is expected in 2015 and 2016.

However, the report also stressed that the normalization of the U.S.'s monetary policies might cause sales to increase in Turkish markets. Thus, if Turkey's monetary policy is tightened, then domestic demand might be adversely affected. It also said that if any further problems arise in the Middle East and between Ukraine and Russia, the Turkish economy might also be affected.

The current account deficit of Turkey was around 6 percent last year and is expected to decrease to 3.6 percent in 2015. Furthermore, the ratio of public debt to gross national product will also continue to decline, possibly from 34.3 percent in 2014 to 32.2 percent in 2015 and 31.2 percent in 2016. While the budget deficit was around 1.5 percent last year, it will fall to 1.4 percent and to 1.3 percent in 2016, the report indicated, and added that the increase in the customer price index, which was around 9 percent in 2014, will decline to 7.5 percent in 2015 and to 7.1 percent in 2016. According to the report, the unemployment rate is expected to be around 10.5 percent in both 2015 and 2016.