Robust exports and elevated fiscal stimulus caused economic growth to exceed 5% in 2017, following a weak 2016. But lower fiscal stimulus, Turkey’s proximity to war-torn Syria and elevated political uncertainty has constrained growth in 2018. Adding further risk to the outlook is the economy’s large foreign financing needs stemming from a persistently high current account dExport Finance Australiait. Corporate leverage has also increased considerably, limiting the capacity for additional borrowing and investment. The large government credit guarantee scheme introduced in 2017 alleviated short-term financial strains and will likely remain in force over the next couple of years. But the scheme could sow the seeds for a domestic financial crisis, particularly in the face of downgrades to Turkey’s credit rating in 2018.
GDP per capita tripled between 2002 and 2016 to US$10,800. However sluggish growth and high economic and political uncertainty has led to a fall in GDP per capita, and is unlikely to regain 2017 levels until 2022. It is highly unlikely that Turkey becomes a high-income economy over the next five years.