Turkey’s new medium-term program (MTP) for 2017-2019 period, involving reasonable assumptions, was announced by Prime Minister Binali Yıldırım at a press conference held in Ankara. The new MTP is the outcome of growth-based policy, while is aimed at keeping the inflation and budget deficit under control.
Turkey’s growth forecast for 2016 has been lowered to 3.2 percent, down from 4.5 percent, which is likely to be overreached, whereas forecast for 2017 has been cut to 4.4 percent, down from 5.0 percent. Growth is forecasted to gain momentum in 2018, with projections for 2018 and 2019 estimated at 5.0 percent. Expected recovery in tourism following normalization of ties with Russia, and by virtue of monetary easing, growth forecasts are likely to be achieved in 2016 and in the following years.
Underlining the importance of fiscal discipline, Prime Minister Yıldırım emphasized that the share of central government budget deficit in GDP, which was 1.2 percent in 2015, will rise to 1.6 percent in 2016, and further to 1.9 percent in 2017. However; this ratio is expected to recede 1.3 percent by 2019. Within the scope of new investments and the new incentives scheme, Prime Minister Yıldırım stated that the widening in the budget deficit is at reasonable levels. The program also expects to see current account deficit at USD 31.3 billion in 2016 (4.3 percent of GDP), and at USD 32 billion in 2017 (4.2 percent of GDP).
Meanwhile, inflation target for 2016 has been set as 7.5 percent in the new MTP. Accordingly, inflation is expected to be 6.5 percent in 2017 and 5.0 percent in 2018, which is in line with the previous MTP forecast. With the help of the recent decline in inflation data, inflation targets, as well, are reachable targets for Turkey.
During the press conference, Prime Minister Yıldırım underlined five pillars to achieve these targets, including; developing human capital, activating labor market, enhancing technology and innovation capacity, strengthening physical infrastructure, and improving institutional quality.