Turkish economy tried to overcome the challenges of global economic slowdown and the local oversupply of the first half of the year through precautionary measures and policies applied in the second half. The effectively applied top and bottom band implementation on the interest rates and the change on the obligatory reserves decreased the domestic demand and the pressure on the current account deficit towards the end of the year. During this period the biggest challenge in front of the economic stability seen as the inflation and the current account deficit were recovered and Fitch Ratings boosted Turkey’s foreign-currency ranking to “investment-grade” BBB-.
As of 2013, the Central Bank, applied a cut on the top-end of his rates band in order to stimulate the economic growth, however in order to keep the liquidity under control, various increases on Turkish Lira and currency reserve ratio were implemented. Despite the current policies in place, it is expected that the improvement on the current account deficit will slow down due to the expected boost in domestic demand in 2013.
In addition to the concerns in the domestic market trends, the develop¬ments on the global markets continue to affect the Turkish economy. In 2012, the increase on the cost of public debt in Euro zone and the slow recovery of the American economy, have been the influential on the global economy that had not reached the anticipated development. In 2012, the development of the global economy was mainly driven by the emerging markets.
In 2013, global economy is expected to show a stronger recovery due to the economic developments in the developed countries and contin¬ued loose monetary policy implementations.
(This article features excerpts from the full report – please download it here)