TURKEY

The global economy continues to grow at a modest pace and the global GDP growth is estimated to be 3.0% percent in 2013 by the IMF. The United States and Europe are likely to experience a slow-to-moderate economic growth through 2014. The US economy is estimated to grow by 2.8 % in 2014 (from 1.9% in 2013). Growth in the Eurozone, after two years of contraction, is projected to be 1.0% in 2014 by the IMF Turkey is a country whose enormous growth potential is challenged with major current-account deficits and domestic political uncertainty. There are challenges that Turkey faces – the Turkish lira is sliding more than 20% against the US dollar since mid-2013. The Central Bank of Turkey raised overnight interest rate from 7.75% to 11.5% – 12% on January 28, 2014. While many international players tend to shift their investments to assets of the developed countries rather than those of the emerging markets, not all investors leave the emerging markets, such as Turkey, whose reduced asset prices are at a much more favorable level. The devaluation of the Turkish Lira can help boost competitiveness and reduce external deficits. But in the short term, it also leads to economic problems by causing inflationary pressures and higher financing costs. The rebalancing growth model will likely help the Turkish economy to heal itself in the intermediate long term. Despite the significant sell-off to date and emerging markets falling out of favor, majority of experts do not see a significant risk of a general emerging market crisis. An overall emergingmarket crisis is unlikely in 2014. Significant capitalflow reversals have been very limited, and no advanced country will raise interest rates sharply until mid 2015.