Following Trump’s election as president, the inflation expectations rise due to anticipated increase in infrastructure investments which imply an expanding fiscal policy in the periods to come.
The US Central Bank (Fed) is expected to act faster than formerly anticipated in raising the interest rates and this is causing a rise in the bond market interest rates.

On the other hand, the protective measures mentioned during Trump’s presidential campaign are still a source of concern.
These measures have the potential to contract the foreign trade volume or the labor market in US and both implies a slowdown in the growth rate of the US economy. The fact that economic policies applied in US may trigger a capital flight from the developing countries is the main risk factor in the upcoming period.

In Turkey, GDP growth has been weak all through the year and the deterioration in the consumer trust index implies that the recovery may take some time.
The government revised its 2016 growth forecast down to 3.2% from the previous 4.5%. Despite the improvement in the consumer loan market due to the interest rate cuts, primarily in mortgage loans in the last quarter of the year, total loan growth has slowed down. The tightening external financing conditions and increasing geopolitical risks imply a slowdown in economic activity and thus, a relatively weak GDP growth in 2017 as well.

Inflation expectations for 2017 are deteriorated due to adverse base factors such as the exchange rate and food inflation.
In 2016, food prices were well below their historical averages and this reflected well on the headline inflation. However, the weakening of the Turkish Lira, the price hikes in the managed/directed products, unfavorable base effect and the expected recovery in the food exports to Russia creates an upward risk on the inflation in the near future. As a reaction to the high volatility in the markets recently, the Central Bank of Turkey (CBT) increased the weekly repo and overnight rates and took additional steps to provide foreign exchange liquidity to the system.

Despite the slowdown in growth, the decline in the tourism income put an end to the recovery in the current account deficit.
Due to rise in geopolitical risks, income from tourism declined by 35% in 2016 and overriding the favorable factors such as slowdown in the economic activity and the low oil prices, current account deficit started to widen again from August onwards. Tougher financing conditions will make external financing extremely important for Turkey and the current account deficit will probably comprise 4.5% of the GDP in 2017.

Turkish Banking Sector Key Indicators


December 2015

December 2016


TL 2.36 trillion

TL 2.73 trillion


TL 1.52 trillion

TL 1.78 trillion

Marketable Securities

TL 330 billion

TL 352 billion


TL 1.33 trillion

TL 1.55 trillion