The Fed’s interest rate hike plays a decisive role in the markets.
The US Federal Reserve Bank (Fed) raised its interest rate by 25 basis points on 16 December 2015 in the first rate hike for 10 years. It was stated that the Fed would not move quickly to increase interest rates and would be moderate in its actions. Following this first interest hike, the Fed may now make a pause in the rate hikes towards the middle of 2016, depending on the performance of the economy, inflation and the strength of the USD.

European Central Bank’s (ECB) moves prove less effective than the Fed in meeting expectations.
Disappointments in Euro Zone markets continued throughout 2015. Disagreement between the governors of the ECB has been preventing the bank from taking bold steps. Falling commodity prices and the downward pressure on inflation may encourage the ECB to reconsider its steps.

While GDP continued to grow over expectations in the third quarter of the year, the narrowing of current account deficit went on with the support of falling commodity prices.
Following the release of the third-quarter growth figures, the 2015 growth forecast was revised from 3.3% to 3.6%. On the other hand, growth is expected to slow to some extent in 2016. Consumer demand is expected to decline as demonstrated by the slowdown in loan growth, along with tougher external financing conditions and increasing geopolitical risks.

Inflation is still subject to upward risks.
The steep increase in the minimum wage and higher inflation expectations are anticipated to keep inflation above 8% in 2016. The Central Bank will most probably continue to its inclination to react to pressures on exchange rates rather than inflation. Following the Fed's interest rate hike, the Central Bank of Turkey is expected to raise weekly repo rate, but continue to keep overnight repo rates at 10.75% by holding liquidity tight.

Continued improvement in the current account deficit in the second half of the year
Although Turkey’s current account deficit improved in the second half of 2015, it still comprises 4.8% of GDP. Assuming an average oil price of USD 55/bbl, the current account deficit is on course to decline to 4.4% of GDP next year; but if energy prices remain low, the current account deficit may retreat to as low as 4% of GDP.

Turkish Banking Sector Key Indicators


December 2014

December 2015


TL 1.99 trillion

TL 2.36 trillion


TL 1.24 trillion

TL 1.48 trillion

Marketable Securities

TL 302 billion

TL 330 billion


TL 1.05 trillion

TL 1.24 trillion