x Abu Dhabi, UAEThursday 27 July 2017

Turkey a booming economy on course to lose its shine

The Turkish economy is forecast to grow 2.3 per cent this year, making a soft landing after growth of 8.5 per cent last year.

The growth of the Turkish economy is forecast to slow this year to 2.3 per cent from 8.5 per cent last year, according to the latest report by the IMF.

Turkey's booming economy is one of the reasons the country is again pushing to become part of the European Union.

Given Turkey's large current-account deficit, Christine Lagarde, the managing director of the IMF, said last week that it was important that the country implement economic reforms to sustain stability and growth, and to increase employment.

"Turkey has had a remarkable period of growth over the last 10 years, more than doubling per-capita income and reducing poverty," Ms Lagarde said on her first trip to the country since becoming head of the IMF in June last year. "However, vulnerabilities are arising as a result of the large current-account deficit financed by short-term capital flows," she said.

Turkey's current-account deficit is nearly 10 per cent of GDP.

One of the key strategies for the Turkish government is to attract foreign investment, and the country has opened itself up to property buyers from the Arab world.

Property prices have been on the rise in the past year and are expected to increase further, with estate agents warning that the influx of Arab investors could inflate the market.

According to the latest index from the Association of Real Estate Investing Companies, Turkish property prices grew 11.6 per cent in March compared with the same period a year earlier.

Turesta, the Istanbul property consultancy, estimates that to cover just local demand, developers must build at least 600,000 properties per year.

"In reality, outside investment will only add extra demand for the remaining real local demand for property," said Arda Obuz, the managing director of Turesta. "It is very obvious that property prices will increase in double digits in Istanbul and Turkey for short run. It seems that Istanbul is the best place to invest in property."

rjones@thenational.ae

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