Wold Bank forecasts strong growth for Turkey in 2008
Posted by meb at January 10th, 2008
A report by the World Bank has predicted that Turkey will continue to see high growth rates in 2008, while also facing a large current account deficit.
In its report titled “Global Economic Prospects,” which was publicized yesterday at a press conference in Singapore, the World Bank forecasts that Turkey’s economy will grow by 5.4 percent in 2008 and estimates a figure of 7.7 percent as the rate of current account deficit over the gross domestic product (GNP).
The report states that the slowing in the contribution of trade to growth rates of European economies will continue in 2008 as a consequence of weakened external demand. “Three notable exceptions to the projected growth slowdown in 2008 are Albania, Hungary and Turkey,” the report says, noting that the improvements in Turkey’s domestic conditions should permit additional easing of monetary policy while “bolstering demand sufficiently to bring about a pickup in GDP [gross domestic product] growth.”
The report notes that continued robust expansion in developing countries will help offset a slowdown in the United States this year amid concerns of a possible recession in the world’s largest economy. Also, it states that the global economy’s growth rate will be a moderate 3.3 percent, which indicates a slight slowdown from the 3.6 percent level of 2007.
“Developing countries, if you add them all up, are basically the same size as the United States,” said Hans Timmer, co-author of the bank’s annual report. “But they are growing more than three times as fast, and that means that their contribution to global demand is more than three times as important as the contribution of the United States,” he said, at the press conference for the report in Singapore.
Not only has the resilience of developing economies mitigated the slowdown in the US economy, it has also helped reduce global trade imbalances by sucking up American exports with the help of a cheaper US dollar, he said.
GDP growth for developing countries is expected to reach a level of 7.1 percent in 2008, while high-income countries are predicted to grow by a modest 2.2 percent, the report notes. Timmer warned, though, that some developing economies are in danger of overheating, which would be exacerbated if interest rates come down sharply as a result of a US economic slowdown, creating excessive liquidity in the global economy.
If capital flows turn away from the United States because of its problems — especially those that stem from the subprime mortgage loans — the funds will end up “somewhere in the developing world and that mechanism could create new bubbles or expand bubbles already in the making,” he said.
To alleviate poverty, the report urged developing countries to harness better technology, saying that rapid technological progress in developing nations has helped to reduce the proportion of people living in absolute poverty from 29 percent in 1990 to 18 percent in 2004. “Technological progress increased 40-60 percent faster in developing countries than in rich countries between the early 1990s and early 2000s,” said Andrew Burns, lead economist and main author of the report. “Developing countries have a long way to go, given that the level of technology that they use is only one quarter of that employed in high-income countries.”
A separate section in the report covers the expectations for foreign trade as cheap Chinese products increasingly spread across the world. Recalling that the system of quantitative restrictions that managed rich countries’ imports of textiles and clothing from developing countries for 30 years was dismantled at the end of 2004, the report emphasized that the significant rise in Chinese exports since then. “China’s exports of clothing soared 22 percent in 2005 and 32 percent in 2006, increasing its market share in those two years to 24 percent and 28 percent, respectively, but the impact on competitors has been less drastic than some had feared,” it commented. Still the report emphasized that this removal of barriers has created a benefit for many other countries like Egypt, India, Peru, Sri Lanka and Turkey, all of which earned more profits from textile production.
Sustained, gradual decline in oil prices as crude demand weakens
Oil prices are likely to fall gradually this year and next as crude demand weakens in the face of record prices, the World Bank projected Wednesday. “If you look at the fundamentals, there is scope for lower oil prices,” said Hans Timmer, co-author of the bank’s annual “Global Economic Prospects” report. “We forecast more or less a sustained, gradual decline.” The World Bank’s report predicts that a barrel of crude oil will cost $84.10 on average this year and fall by 6.8 percent to $78.40 a barrel in 2009. It estimates that the average price of crude oil last year was $71.20 a barrel. The forecasts are based on an average of three benchmark oil prices: Dubai, Brent and West Texas Intermediate. “On the demand side, what you are seeing is that the high oil prices start having an impact, in the sense that it slows down demand for oil,” Timmer said.
source: Today’s Zaman
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