In these days in which we are about to complete the first three months of 2015, there is a little time left for us to obtain information on the Gross National Product (GNP) of 2014 which we left behind. All data indicates that 2014 was far from satisfactory in terms of growth and that the growth rate will remain below 3%. However, everyone agrees that the Economy of Turkey should not fall below 5% in order for fundamental problems such as unemployment to be solved. On the other hand, Turkey has an ambitious target of ranking among the top 10 economies of the world in 2023. Growing rates required to reach this target exceed these figures. How did the economy progress in the first period of 2015? We use the model in a study we conducted with Michele Modugno and Barıs Soybilgen in order to estimate the GNP growth of the first quarter of 2015. This model, including all variables that have been published up to now, is run again to review the growth forecast when a new variable is defined. The growth forecast for the first quarter of 2015 measured by using this model named as “Nowcasting” is given in the diagram below. The diagram refreshes the forecast each time new data is announced. The forecast has increased towards a growth of 2.96% with the balance of payments data announced by March 11. This forecast showed a sharp decrease with the industrial data announced on March 9 and fell to 2.79%. Our forecasts may change for the better when new data is announced in the upcoming weeks and months (You can see the up-to-date forecast via www.gsyihsimdi.com). However, unfortunately, we predict that the growth forecast for the first quarter of 2015 will be worse and even close to 0 in the upcoming months in the light of the data announced. But why? Let us explain the situation. The variable that the growth rate is most closely related to is industrial production. Industrial production grew by -2.32% on a yearly basis in January, in other words, the production decreased. There are important signs showing that the same trend, in other words, the shrinkage will continue depending on the base effect even at a lower rate in February (for example; according to Turkey Purchasing Manager’s Index (PMI), factory outflows and new orders continued to decrease in February). Considering the possible effects of the discussion between The Central Bank and the politicians regarding the interest rate, rapid increase and growing volatility in US Dollar on the confidence of the consumers, it is not possible for us to make a brighter forecast for March. Thus, growth rate in the first quarter seems to decrease and approach 0. But what is the reason for this situation? Before sharing our forecasts regarding the remaining months of 2015, let’s take a look at the past. 2000s were the years in which Turkey made a strong impression with its high growing performance in the international arena. Following the big financial crisis across the world, Turkey had the 2nd place in the world growth league with its excellent performance of 9.16 percent in 2010. Moreover, this was not a first; apart from the crisis years of 2000s Turkey achieved a great success with its 2002-2007 average of 6.79 percent. Data in the diagram explains the growing dynamics after 2010. For example, while domestic demand of 11.04 is placed on the positive side of the growth of 9.16 in 2010, foreign demand of 4.8 is placed on the negative side (the difference of 2.5 between them is balanced with the change in the stocks). During 2010-2013, the only year in which the foreign demand was positive is 2012. However, the domestic demand was negative and the growth rate was approximately 2.13 in that year. Growing dynamics of Turkey is based on the domestic demand and the buoyancy in the domestic demand can only be ensured at the risk of high current accounts deficit. The course of events in 2014 reminds 2012. Just like 2012, 2014 seems like it will be a year in which the investments will have a negative effect, domestic demand will have a positive but limited effect on the growth rate and contribution of foreign demand to growth may not reach the levels of 2012. Therefore, this composition is expected to result in a growth rate similar to 2012. If you look closely, along with the low growth rate, the current deficit was -6.15 in 2012. Upon the effect of low oil prices, the current deficit seems to be lower, as per our forecasts, this rate will be approximately -5.75 in 2014. In that case, the contribution of the foreign demand should be increased for a higher and sustainable growth rate, thus the domestic demand may remain low and current deficit may be at a reasonable level. World economy slows down almost everywhere except USA and it is not realistic to expect a buoyant foreign demand from this economy in 2015. Therefore, this target is hard to achieve. So, is it possible to display a similar performance as 2013 by enlivening the domestic demand? In 2015 in which we expect an increase in interest rates by FED, it will not be easy to achieve external financing which will keep the domestic demand at this level. Moreover, it does not seem to allow refunding that the balance sheets of households achieved a certain margin. It will not be reasonable to expect the companies to make investments in this situation where uncertainty is high. Moreover, we should keep in mind that balance sheets of real sector companies having open positions, in other words, net foreign debts over USD 180 billion are far from suitable for investment after the latest developments regarding exchange rate. For all these reasons, following a discount to be performed in policy interest, even if the market interest rates may be decreased, this does not seem possible to enliven the domestic demand. Consequently, we think that 2015 will be a hard year and we foresee that the growing rate may be below 2014 figures. As the worst scenario, could 2015 be a crisis year to even a small extent? According to our opinions, this scenario is not likely to happen. This is because the situation of public finance is in good shape and balance sheets of the financial sector remain stable. However, due to the weak structure of domestic and foreign demands, in Turkey’s standards, 2015 may be a year in which growth rate will be low. So, what will the future of the Turkish economy be like after 2015? Can the economy change the course it’s been on since 2011 and which can be defined as a low growth rate of approximately 3%, inflation showing a fixation tendency of nearly 8% and a current deficit of 5-6% following the two years in which growth rates are high due to the domestic demand financed by foreign sources? Income per capita in US Dollars has remained stable since 2008. This situation will remain the same in 2014 and 2015; it may even decrease. It is not possible to reach the goals of 2023 at this speed. Turkey should at least double this performance in order to reach its goals. Is it possible? Our first assessment is that it cannot be achieved at these domestic demand standards. The main reason for this is that global liquidity abundance due to the USA will not continue; and the other reason is that the balance sheets of households do not allow for more refunding. When this is the case, as the current deficit decreases and savings increase, a growth driven by investments should rely on foreign demand. 2016 may be a year in which a new growing period will start following an economic recovery in the European region. However, in order for Turkey to progress in this direction, it should initiate a structural change.