Growth rebounds but vulnerabilities remain
Overview:
Having endured a severe economic downturn in 2009, firm signs of a recovery are now in place with industrial production, exports and GDP all growing. Progress under the IMF agreement remains sound. However, significant economic vulnerabilities remain. The current account deficit is still very high, inflation is accelerating and the fiscal deficit has increased sharply in order to try and cushion the downturn. Looser monetary and fiscal policies (and a more flexible exchange rate regime) were appropriate responses to the crisis. However, the central bank is now hiking interest rates to combat inflation and the government must now, likewise, tighten fiscal policy over the next few years to stabilise the public debt ratio. The ratification of the Turkish protocols has stalled.