EU Report Praises Turkish Economy

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The European Union is due to release its annual report on October 12, and will praise the Turkish economy for implementing successful policies during these difficult times. The economy in Turkey expanded rapidly last year and during the first quarter of this year. This was mainly driven by strong domestic demand, but despite this Turkey’s GDP per inhabitant stands at 48% of the EU average.

 

Although the report declares that fiscal and monetary policies have been successful, it does add a word of caution about the current account deficit, and possible concerns over inflation.

On another positive note the report finds that budget and taxation policies have been successful, and that the employment policies have resulted in reduced unemployment figures. While Turkey was hit hard by the global financial crisis, it had already implemented regulatory and supervisory reforms, and this resulted in the economy rebounding strongly. The economy grew by an amazing 11% during the first quarter of this year.

Although the EU report is mainly positive, it does point out that Turkey may need to take steps to avoid a boom, bust scenario. It thinks that Turkey should make further progress with improving fiscal transparency, strengthen inflation targeting and adjust the fiscal and monetary policies to preserve financial stability.

The EU report underlines Turkey’s strengths and weaknesses, and highlights its declining unemployment rate and the good performance of its budget.

It also highlights the weakness of the trade and current-account balances, especially as strong domestic demand has increased the number of imports, while exports to certain countries in political crisis have declined. Strong domestic demand coupled with higher food and fuel prices could push up inflation. However compared with the European Union crisis, these woes seem relatively minor.

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