IMF raises Turkish growth forecast

Turkey's economy may expand 7.8 percent this year, more than double the pace of Europe's other emerging markets, the International Monetary Fund said yesterday, raising its forecast on stronger-than-expected consumer spending. The IMF's previous growth forecast for Turkey, published a month ago, was 6.1 percent. Its prediction for overall expansion in emerging Europe, which includes Turkey and excludes Russia, was 3.7 percent, according to the IMF's new World Economic Outlook. The Washington-based lender expects Turkish growth to slow to 3.6 percent next year. Turkey is rebounding from the global financial crisis faster than many peers in emerging Europe thanks to "relatively strong household and bank balance sheets" and the normalization of global trade and capital flows, the IMF said. Gross domestic product grew an annual 10.3 percent in the second quarter, after expanding 11.7 percent in the first three months. The economy won't sustain that pace in the second half of the year, Finance Minister Mehmet Simsek said last month, forecasting full-year growth of 6-7 percent. Turkey broke off loan talks with the IMF in March. Prime Minister Recep Tayyip Erdogan, who faces elections next year, says the economy doesn't need IMF money and has dropped plans for legislation to limit the budget deficit. Inflation will average 8.7 percent this year and slow to an average of 5.7 percent next year, the IMF said. The Central Bank has held the benchmark interest rate unchanged at a record low of 7 percent for 10 months. In recent months it has begun to withdraw the additional liquidity it provided the banking system during the 2009 economic crisis. Inflation was 9.2 percent in September and will "gradually slow" in the rest of the year, the CB said Tuesday. Its year-end target is 6.5 percent. The current-account deficit will widen to 5.2 percent of GDP this year and to 5.4 percent of GDP in 2011, the IMF said.