Moody's upgrades Turkey's GDP outlook

By Fatih Erkan Dogan

ANKARA (AA) - Credit rating agency Moody’s revised up Turkey’s 2017 and 2018 GDP growth forecasts on Monday but warned such performances may be short-lived if not backed by structural reforms.

The labor market, taxation and pensions were singled out as areas for reform.

In a credit outlook report, Moody’s claimed Turkey’s fourth-quarter economic rebound was unlikely to last without changes to support growth.

On March 31, the Turkish Statistical Institute released a report which showed the economy’s fourth quarter GDP at 3.5 percent and annual GDP growth at 2.9 percent, both significantly higher than estimates.

Moody’s wrote: “Our own forecast, revised upward following the release of the fourth-quarter GDP data, calls for growth of 2.6 percent instead of 2.2 percent in 2017 and 2.9 percent instead of 2.7 percent in 2018.”

Regarding the upgraded GDP estimates Moody’s said the data were “much stronger than we expected: our forecast for the yearly increase, made just two weeks before the data release, was 2.0 percent, which was similar to the consensus view”.

However, the institute noted that -- despite GDP growth rates in 2016 being better than expected -- they were significantly lower than the previous year.

“In our view, postponing the implementation of structural reforms such as for the labor market, tax and pension systems means that last year’s slowdown in growth was inevitable, even though the figures were better than we had initially expected”.