Turkey’s economy to grow 4.7 percent in 2018, inflation to decline, World Bank says

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Turkey's economy will grow 4.7 percent in 2018, according to the newest World Bank report.

In 2019, Turkey's economy will grow at 4.4 percent and in 2020, at 4.0 percent, according to the bank's Europe and Central Asia Economic Update report out Tuesday.

The country's inflation is expected to reach 10.4 percent by the end of this year and slow to 9.0 percent in 2019 and 8.2 percent in 2020, according to the bank's latest forecast.

Turkey's current account deficit is projected to be -5.7 percent this year, -5.6 percent in 2019 and -5.5 percent in 2020, said the report.

"Turkey's strong recovery in 2017 (at 7.4 percent) came at a cost of widening macroeconomic imbalances. Growth in 2018, however, is projected to moderate closer to potential, at 4.7 percent. Poverty is forecast to decrease, although at a slower pace than previous years," the report said.

Noting that expansionary policies will likely be in place to stimulate demand, especially ahead of the upcoming elections, the report said: "Key risks include inflation and tightening of global financial conditions -- all of which could constrain access to external finance, raise cost of external debt, and weaken the external balance."

The report added that: "External vulnerability for Turkey remains high. The U.S. monetary policy tightening in 2018 could increase the pace and volume of capital outflows. This increases interest and exchange rate risks for Turkey's external debt. The private sector is particularly affected as it accounts for 70 percent of external debt. Although most of the debt is of long-term maturity, a weaker Turkish lira and costlier external financing might adversely impact corporate balance sheets."

In 2017, Turkey's economy surpassed the expectations of all international institutions with 7.4 percent growth.

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