World Economy

Turkey GDP to Grow Above 4%

Turkey GDP to Grow Above 4%  Turkey GDP to Grow Above 4%

Deputy Turkish prime minister, Mehmet Simsek,  said he expected faster economic growth this year than official forecasts and an even stronger expansion next year. He projects GDP growth of above 4% for next year.

Simsek told Reuters in an interview that the central bank had been “very clear” in its statement explaining its surprise decision to leave interest rates steady this week, in comments that may do little to quell investors’ concerns about the bank’s independence.

The “positive surprise” of third quarter GDP growth of 4% pointed to full-year growth of 3.5 to 4% and more than 4% growth in 2016, said Simsek, who is responsible for the performance of the economy.

In October, the government cut its growth forecasts to 3 from 4% in 2015 and to 4 from 5% in 2016.

“This growth is a rather good outcome given the serious political instability due to elections, troubles in the Middle East and surrounding countries and the narrowing demand due to the collapse in commodity prices,” he said.

Simsek, a former finance minister, took up his new post last month after an election that handed one-party rule back to the AK Party, which oversaw an economy that has grown around 5% annually on average since it first came to power in 2002.

The deputy prime minister also said he expected the current account deficit, resource-poor Turkey’s biggest economic weakness.

 Profit Pressure

Volatility in markets and stricter regulations are likely to put pressure on profits and capital adequacy ratios across Turkey’s banking sector next year, the head of top-listed lender Isbank said on Friday.

Adnan Bali told Reuters in an interview that an expected 10% return on equity and 2% return on assets posed a challenge to the health of the sector.

“Unfortunately there is a perception that banks profit too much. Any given (Turkish) sector has 15-20% profitability, whereas it’s 10% in the banking sector.

 A return on equity reduced to 10% and a return on assets less than 2% will not carry the banking sector,” Bali said.

Turkey’s implementation of the Basel III set of global banking regulations, due to come in March, is expected to crimp profit and force banks to hold more regulatory capital.

Turkish bankers have been hoping for some easing in the measures, but Simsek said that the implementation would go ahead as planned.

Bali said that Turkish banks will average 10-12% growth in loans and deposits in 2016, with capital adequacy ratios likely to be at 14-15%.

“Within the frame of Basel III regulations that will be implemented from March, and taking into account the deposit costs as well as limits on fee and commission revenues, it will be difficult to improve profitability,” Bali said.