ANKARA

The European Bank for Reconstruction and Development forecast growth for Turkey at 3 percent in 2015, in a report released on Thursday.

The European Bank for Reconstruction and Development (EBRD) expects the Turkish economy to grow 3 per cent in 2015 and 2.8 per cent in 2016, below the country’s long-term potential, according to its latest forecast Regional Economic Prospects, published today.

The report cited  weaker domestic demand in 2016, amid rising costs of funding due to moderating global liquidity, may be partly offset by an improvement in exports," the report said. 

But recovery in the eurozone should support exports, while weaker domestic demand and lower commodity prices reduce import bills, the report said.

Worsening investor sentiment towards emerging markets may also affect the Turkish economy. In mitigation, the banking sector remains well-capitalised with low non-performing loan ratios and public finances stay stable.

In general, the outlook for economies where the EBRD invests remains split, with countries further to the east weighed down by the Russian recession and weak oil and other commodity prices, the report said. 

 “We may be looking now for something of an upturn for emerging markets in 2016 after five consecutive years of slowdown,” Hans Peter Lankes, the EBRD’s acting chief economist, said,  “But there are significant risks on the downside.”

The report also said that the refugee crisis that intensified sharply in 2015 is affecting the economies of a number of countries.

“Among frontline countries, Turkey is estimated to be hosting more than two million refugees, while in Jordan they account for almost one-fifth of the population. This massive influx has in some cases strained public services, government finances and labour markets,” said the EBRD. 

According to EBRD, refugee transit countries in south eastern Europe which have provided medical and social care, food, water, and accommodation for refugees are facing logistical and fiscal challenges.