Macroeconomic forecast of Turkey for the next 5 years (up to 2017)

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Introduction

Turkey has an overwhelming and continuously expanding economy. Additionally, it has viable macroeconomic indicators predictable in the coming 4-5 years from 2012. According to Eurocontrol (2011), the current economy of Turkey is commendable since it recorded GDPs of 8.9% and 6.5% in 2010 and 2011 respectively, which are among the world’s highest GDP figures. Concurrently, the country barely experienced any remarkable economic crisis in the past as evident by its macroeconomic indicators.

This is a considerable provision in the context of fiscal growth and economic expansion. Current news on the matter is indicating positive prospects in regard to Turkey’s economic prowess. It is vital to comprehend how Turkey will uphold its economic status so as to remain relevant in the market. Nonetheless, it is still a task to remain buoyant in the current economic hitches as indicated in some sources.

It is evident from various sources that the country has opened up its macroeconomic sectors to accommodate a considerable market share. This is vital in diverse contexts. In order to establish a credible macroeconomic forecast on Turkey, the aspects of Real GDP (R-GDP), Inflation Rate, Unemployment Rate, Interest Rates – 5 year fixed mortgage rates, Exchange rate TL:US$ (av), and Exchange rate US$:€ (av) will be discerned considerably.

Evidently, R-GDP indicates the ultimate value of commodities a country produces in a given period after considering the price changes that might have occurred. Precisely, it considers the exact GDP of a country, which is the core economic indicator of a given country as indicated earlier. Turkey exhibits a considerable GDP forecast in the next five years. Concurrently, the country has had controllable inflation records in the past as evident by its unshaken economy.

Country’s Microeconomic Forecast (Viewswire, 2012)

Key indicators	2012	2013	2014	2015	2016	2017
Real GDP growth (%)	3.2	3.8	5.1	5	5.2	5.1
Consumer price inflation (%)	9.2	7.8	7.2	6.6	5.1	4.5
Budget balance (% of GDP)	-2.6	-2.6	-2.6	-2	-2	-2.1
Current-account balance (% of GDP)	-7.7	-6.8	-6.3	-6	-6.3	-6.7
3-month interbank money market interest rate (av; %)	5	5.1	5.4	5.8	6	6
Exchange rate TL:US$ (av)	1.8	1.79	1.79	1.79	1.79	1.79
Exchange rate US$:€ (av)	1.28	1.26	1.25	1.24	1.26	1.26

Real GDP (R-GDP)

Accordingly, Turkey’s Real GDP forecast spreads considerably with 2017 indicating a forecast of 5.1. This is a considerable provision as shown in the previous table. The country has a stable GDP growth despite the economic challenges noticed in some financial sectors. Macro-economically, the growth rate of R-GDP refers to the percentage increase/decrease of R-GDP with reference to a given base year.

The change that occurs to the R-GDP in a given period is transferable into some rates that depict the changes and trends witnessed during the exact period under review. R-GDP considers the aspects of price change (inflation/deflation). Initially, nominal GDP only considers the entire income of a country in the realms of goods and services produced. Conversely, R-GDP considers the probable price changes that might have occurred since the last period of calculations (base year used).

Turkey registers remarkable R-GDP growth rates as witnessed by its recent economic growth. When determining the growth rate of the R-GDP, one considers the R-GDP change that occurred during the period of study with reference to the base year. Multiplying the result by 100 will provide the desired percentage change (R-GDP of the base year Minus R-GDP of the year under review divide by R-GDP of the base year times 100).

Inflation Rate

Inflation refers to the percentage change in prices of commodities in a given region/country when compared in two successive terms. It is crucial to note that inflation depicts the increase in prices in relation to the year of reference (base year). Escalation in the price index within a given period signifies the alleged inflation rate.

Its determination considers the difference that exists amid the two periods under review, dividing the result by the price index of the base year and then multiplying the result by 100 to attain the percentage rate. Precisely, inflation refers to the price increase in consumer commodities with a consequent hike in the living cost. Inflation rates might influence the economy of the country since it deters the purchasing power. Turkey has had controllable inflation records in the past as evident by its unshaken economy.

Unemployment Rate

Unemployment rate depicts the percentage of the unemployed individuals within the labor force of a given country. The concerned unemployed must be having the potential to work hence searching for any available opportunity; nonetheless, the country has no job provisions for them. The labor force consists of those individuals in the working age. They are either employed or involved in an active job-search.

To determine the unemployment rate, the total population of the labor force and the employed people in a given region/country is considered. Consequently, the difference between the two signifies the number of the unemployed. Dividing this number by the total labor force population and multiplying the result by one hundred will give the unemployment rate/percentage of a country at a given period.

Interest Rates – 5 year fixed mortgage rates

Additionally, a rate charged on given money lent to an entity refers to the interest rate. The fixed mortgage aspect of it refers to the constancy with which the rate persists over a given period. To determine the interest rate, one considers the difference amid the money lent (principal) and the total sum returnable.

Dividing the difference (interest) by the principle and multiplying by one hundred gives the interest rate for the period concerned. In macro economics, the central bank of a country might set given interest rates chargeable for given periods. This determines the interest rates of a given country.

Why each variable is a significant economic indicator

The macro-economic variables are crucial economic indicators since they show and help in predicting the economic prospects of a given country, region, or the world. Evidently, R-GDP indicates the ultimate value of commodities a country produces in a given period after considering the price changes that might have occurred.

Precisely, it considers the exact GDP of a country, which is the core economic indicator of a given country as indicated earlier. It is measurable in quarters per a given year. The Turkey’s stable and escalating R-GDP rates show its economic prosperity. Conversely, inflation rates indicate the instability and escalation of prices within a given economy. This might affect the economy in numerous sectors since the purchasing rates of commodities will diminish hence compromising the circulation of cash.

Additionally, low business rates are evident translating into reduced revenue of a country in a given period. High inflation rates indicate a poor economic progress while low inflation rates depict stability and economic prowess in the period under review. Inflation usually signifies the probability of recession within a country. These are severe economic indicators since they stimulate poor fiscal solidity and compromise economic expansion.

Unemployment rate is crucial in depicting the number of viable human capital in the job market but lack opportunities. Its rate means that the proportion involved is not productive to the country hence not contributing to the economic expansion.

It is the labour market that constitutes the service industry with an ultimate contribution to the total GDP of the concerned country. If the majority of potential workers are out of the job market, the economy might slump due to the reduced periodic earnings and minimal value of the ultimate commodities, which constitutes the total GDP.

Similarly, interest rates influence the borrowing probabilities of people within a given country. Escalated unemployment rates depict recession, which is an unpleasant economic indicator. High interest rates might affect investments and discourage the borrowing trends. This will reduce the money circulation hence affecting the economy. Conclusively, the figures emerging from calculating the discussed macro-economic variables signify the progress or slump of economy to the people of the concerned country/region.

Figurative Predictions

According to Eurocontrol (2011), the Turkey’s economic forecast in the realms of GDP growth is 2.4%, 6.2%, 6.0%, 5.6%, and 5.4% from the year 2012 to 2016 respectively. These are the baseline figures (minimum prediction) while the maximum annual average prediction is 6.7%. 2008-2011 registered actual growths of 0.7%, -4.8%, 8.9%, and 6.5% respectively. The average base inflation rate registered an approximate of 5.12%, which is quite remarkable and steady.

According to PricewaterhouseCoopers (2011), the Turkey’s inflation rate forecast lies at 8.3% 5.5%, 5.2%, 4.6%, and 4.9% for the years ranging from 2012-2016. The actual rates for 2010 and 2011 are 8.6% and 5.9% respectively. The average rate forecast is 5.7%, which is remarkably minimal compared to other countries.

According to Eurocontrol (2011)’s forecast, Turkey might record a remarkable drop in its unemployment rate as from 2012 to 2016 with predictable figures of 8.7%, 8%, 7.5%, 7.6%, and 7.0% respectively. The forecast averages at 7.76%; a figure less than the previous 8.8% of 2011. This indicates a reduced redundancy rates in the future if the country upholds her economic expansion.

According to Viewswire (2012), the predictable interest rates for Turkey from 2012-2016 are 5.6%, 6.0%, 5.8%, 5.8%, and 5.8% respectively. The trend indicates that the lending rates might remain constant despite the challenges and fight to dash the economy. The average rate will be 5.8% when calculated at a fixed mortgage rate.

Explanation of Forecast

Notably, the forecast concerning the macroeconomic indicators is true. This is evident by the recent economic increases and stability witnessed in Turkey. The trend seems to have the capability to continue for years. The government opens up its free market territories and creates economic reforms that will guarantee a continuous increase in macroeconomic exhibitors.

The minimum (average) GDP increase of 5.12% is true in Turkey’s context following the recent tremendous GDP amplification. The country has increased her production trends hence indicating the probable increase in her R-GDP at any given period. Turkey’s efforts to expand her economic opportunities and the utilization of her resources will obviously help in establishing and sustaining the predicted R-GDP growth rate.

Additionally, maintaining its inflation rates at an average of 5.7% is achievable since the economy is growing and the effects of the global economic crisis are still evident. This inflation rate is remarkably low and will help in sustaining the Turkey’s growing economy. It is evident that the change in prices of commodities after a given period indicates the inflation rate.

The stated predictions indicate realistic figures in relation to the dynamism in the world market. It is predictable that the prices of commodities will increase hence signifying the alleged inflation rates. The country will have to adjust the prices of her commodities to those of the world market in order to compete favorably and enhance its exportation and importation plans.

This will obviously increase prices as claimed hence materializing the predicted inflation. Another factor that might maintain inflation rate at that point is the fluctuating production costs that have engulfed numerous countries worldwide. The escalating energy prices will obviously affect the production and service delivery costs. These will eventually create inflation since prices of commodities will eventually increase.

The reducing redundancy/unemployment rates witnessed in the successive predictions are valid since the country currently creates numerous economic opportunities with an ultimate increase in the number of job prospects. Additionally, the escalating number of foreign investments and other local production opportunities in several economic sectors will obviously increase employment rates during the reviewed periods.

The maintained lending rates demonstrate the borrowers’ ability to benefit from the reduced lending charges hence aid the release and circulation of cash into the market. These interest rates are predictable and might persist. Central Bank of Turkey has enacted various financial reforms to ensure that the economic increase and the lending rates are coherent. The macro-economic variables are vital economic indicators.

They show and help in predicting the economic prospects of a given country, region, or the world. Evidently, R-GDP indicates the ultimate value of commodities a country produces in a given period after considering the price changes that might have occurred. Precisely, it considers the exact GDP of a country, which is the core economic indicator of a given country as indicated earlier. Turkey exhibits a considerable GDP forecast in the next five years.

Conclusion

The current macroeconomic news regarding Turkey is overpowering. The country is bound to do well economically in the next 5 years. This is a considerable provision when considered critically in diverse contexts. It is evident that macroeconomics is a branch of economics that handles the feat, structure, activities, and judgment of the entire economy.

It does not consider individual markets individual markets. Precisely, it is a general field in regard to national, regional, and global economies. Turkey has an overwhelming and continuously expanding economy. Additionally, it has viable macroeconomic indicators predictable in the coming 4-5 years from 2012.

Evidently, the current economy of Turkey is commendable since it recorded GDPs of 8.9% and 6.5% in 2010 and 2011 respectively, which are among the world’s highest GDP figures. Concurrently, the country barely experienced any remarkable economic crisis in the past as evident through its macroeconomic indicators. Conclusively, the figures emerging from calculating the discussed macro-economic variables signify the progress or slump of economy to the people of the concerned country/region.

References

Deloitte. (2012). Turkey: More positive than negative. Web.

Eurocontrol. (2011). Medium-Term Forecast. Web.

PricewaterhouseCoopers. (2011). The table summarizes our latest inflation forecasts. Web.

Viewswire. (2012). The Economist Intelligence Unit View. Web.

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