The International Monetary Fund (IMF) has cut Turkey’s growth forecast by 0.2 percent to 4.2 percent amid concerns about inflation and imbalances and as signs indicate uneven global growth over the next year, the Ahval news website reported on Tuesday.
The IMF’s World Economic Outlook July 2018 stated that emerging markets, such as Turkey and Argentina, needed to raise interest rates due to imbalances in the global economy.
The report also gave Turkey as an example of an economy that had tightened due to large external deficits, noting that Turkey’s growth is likely to significantly drop to 4.2 percent this year from 7.4 percent in 2017.
Last week IMF spokesperson Gerry Rice warned Turkey to ensure “full operational independence” for its central bank.
Newly appointed Treasury and Finance Minister Berat Albayrak, the son-in-law of President Recep Tayyip Erdoğan, said it would be improper to discuss the central bank’s independence; however, analysts expect Erdoğan to tighten his grip on economy.
A report released by the IMF in May set out a list of reforms required to maintain healthy growth in the Turkish economy.
The report warned global economies about the risks that have “shifted further to the downside,” largely because of US President Donald Trump’s willingness to wage a trade war with China.
“Tighter financial conditions could potentially cause disruptive portfolio adjustments, sharp exchange rate movements, and further reductions in capital inflows to emerging markets, particularly those with weaker fundamentals or higher political risks,” the report said.
A recent report from the Economic Policy Research Foundation of Turkey (TEPAV) also showed that Turkish direct investment overseas has been growing faster than foreign direct investment coming into the country.
In May, outward direct investment (ODI) reached around $3 billion while foreign direct investment (FDI) remained at around $9.5 billion, according to the Diken news website.