OREANDA-NEWS. October 4, 2011. Renaissance Capital, the leading emerging markets investment bank, has initiated in-depth economic coverage of Turkey, as the Firm continues to extend its Turkish research footprint. Turkish Economy 101, issued today, compares the country with its neighbours, and assesses the opportunities and risks presented by its economy.

“As a high-growth emerging-market economy, Turkey has attracted a lot of capital flows in the past 10 years, says Mert Yildiz, Renaissance Capital’s Turkey & Emerging Europe Economist, and author of the report. “Looking at the long-term drivers of growth, we seek to uncover the dynamics of the Turkish economy, and where the risks and opportunities lie.”

Turkey is the third-largest country in Europe, with a relatively young population of 74mn, and average GDP growth of 4.4% over the past 10 years. Renaissance Capital expects a similar growth rate over the next five years. Although Turkey’s average GDP growth is comparable with most CEE and Middle East and North Africa countries, it is more volatile, the report concludes.

The country has seen stable inflation over the past five-to-six years, adds Renaissance Capital. However, inflation is high relative to other emerging market countries, partially due to the population dynamics of Turkey, making it structural. The lira is highly volatile, but mostly follows the movements of the euro/dollar rate, according to the report.

“Mr. Yildiz adds, “We believe GDP growth in Turkey going forward will be volatile, as periods of high growth will be followed by periods of low growth. That said, given its geopolitical importance, favourable labour conditions and big infrastructure gap, Turkey still has a lot of potential compared with its peers. We highlight soft and hard infrastructure as two sectors that could experience high growth in the medium term, although Turkey’s dependence on foreign savings and imported energy may continue to restrain overall growth.”