Robust exports and elevated fiscal stimulus caused economic growth to exceed 5% in 2017, following a very weak 2016. But lower fiscal stimulus, Turkey’s proximity to war-torn Syria and elevated political uncertainty at home will constrain growth. 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 their 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.
GDP per capita tripled between 2002 and 2016 to US$10,800. Per capita income is forecasted to reach US$13,000 by the end of the decade. Turkey is unlikely to become a high income economy over the next five years.