WIIW The Vienna Institute for International Economic Studies - Wiener Institut für Internationale Wirtschaftsvergleiche

Thus far in 2013 Turkey has been recovering from the dramatic growth slowdown in 2012. The Central Bank of Turkey (CBRT) had induced that slowdown by shifting perceptibly towards tight monetary policy. Any recovery since then has been associated with a certain loosening of that stance, but the bank is still using tools designed to control credit growth. Apart from the above, the CBRT has had to undertake attempts to discourage too strong an inflow of capital (short-term in nature) by reducing interest rates. Recent political developments, as well as the announcement of possible shifts in the US Fed's policy with respect to quantitative easing, have added an additional element of uncertainty regarding the nature of possible instabilities (e.g. leading to capital outflows rather than inflows) and the country’s policy response to the same. Those uncertainties notwithstanding, Turkey is expected to grow at 3.5% in 2013 and 4.5% in 2014.