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been inadequate and undermined confidence in the possibility
for growth. To deal with the threat of entrenched deflation, the
EU had to consider unprecedented measures, such as negative
interest rates and US-style quantitative easing programs.
Meanwhile, early elections in Greece, sparked by a political
impasse in the presidential elections and the major electoral
gains of separatist parties, exposed and magnified the risks for
the political and economic future of the European Union.
Moreover, Japan, the third largest developed economy, had to
contend with economic issues similar to those of the EU. The
country technically entered recession in 2014 and it responded
with expansionist policies in 2015 to stimulate the economy while
targeting an inflation rate of 2%. Hence, 2015 marked the end of
US monetary expansion while expansionist measures in Europe
and Japan were accepted as options to fill the void.
Developing countries attained economic growth but at lower
levels than in previous years. Alongside Turkey, most notable in
this regard were India and China, while the Russian Federation
was an exception.
Geopolitical risks had a major impact on the world economy
in 2014. The conflict in Ukraine and the consequent issues
between the Russian Federation and Western countries, the
enduring civil war in Syria and its spread to northern Iraq through
the Islamic State, and the persistent conflict in Libya, present
significant issues for 2015 with any one of these geopolitical risks
holding the potential to amplify economic uncertainties.
Falling crude oil prices is the last important development of 2014.
Crude oil prices fell from $103 a barrel in June 2014 to under
$60 by the end of the year as a result of the US becoming a net
oil exporter through the exploitation of its oil shale gas reserves
and the rapid growth in demand for non-OPEC oil supplies,
primarily from Libya, which overcame its production problems.
The IMF estimates that crude oil will hold at $57 a barrel in 2015,
which means a cheap oil climate bringing with it a new normal
that will change balances for exporting and importing countries.
Turkey’s growth rate beneath expectations
In this context, the Turkish economy opened 2014 with strong
first-quarter growth of 4.8%. However, economic growth slowed
to 2.3% in Q2, 1.9% in Q3 and 2.6% in Q4. With overall growth
of 2.9%, the Turkish economy did not meet expectations and
failed to live up to its potential.
urkey held two tense and politically risky elections
in 2014. Moreover, tightening monetary conditions
caused by uncertainty attendant to international
geopolitical events, led to a pronounced decline in
domestic demand. While investments and capital
flows decreased significantly, growth continued in
large measure due to exports.
Despite weak domestic demand, inflation rose significantly in
2014. Consumer inflation, which reached 9.66% at one point
during the year, retreated to 8.17% by the year’s end, which
was considerably higher than the Turkish Central Bank’s
5% goal. High inflation restricts the option of stimulating
domestic demand. Therefore, Turkey goes forward in 2015
with this challenging issue.
Nevertheless, the current account deficit, a chronic structural
issue for Turkey, contracted by 30% in 2014 to end the year
at $45.86 billion. This significant improvement, largely the
result of weak domestic demand and devaluation of the
Turkish Lira, is expected to continue because of falling oil
prices.
The Prime Minister, Prof. Ahmet Davutoğlu, who formed
a new cabinet in July 2014, announced two Primary
Transformation Programs of important structural measures
as part of the 2014-2018, 10th Development Plan. Turkey,
which will assume the G-20 presidency in 2015, must strive
to make further structural transformations soon.
The Medium-Term Economic Program announced in 2014
foresees growth of 4% in 2015, while IMF projections
calculate it at 3.4%.
Borusan’s 70th Anniversary
In 2014, we celebrated the 70th anniversary of Borusan’s
founding. The company sprang from a small pipe-making
workshop in Halkalı district of Istanbul and now it has
revenues of $4.5 billion, 7,000 employees, and it operates in
global markets.
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