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 deficit. 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.