Turkey likely to post 4.2% GDP growth for 2016

Political uncertainties and terror strikes in Turkey have renewed the downward pressure on the lira. Last month the Turkish currency stabilized against the U.S. dollar, further aiding the inflation outlook.

Any external impact on the exchange rate will generate higher inflation, which will further put downward pressure on the currency. The central bank of Turkey came under immense pressure as the inflation expectations rose by 30bp from 8.2% to 8.5% for 2016. This meant that the people do not expect the inflation to moderate in the forthcoming quarters.

"On the positive side, expectations about 2016 GDP growth are being revised up: the same survey showed an upward revision from 3.4% to 3.6%; we forecast 4.2% growth this year" Commerzebank said in a research note.