The growth forecasts for the upcoming period are revised upward for advanced as well as emerging economies, Turkish Central Bank (CBRT) said on Thursday.
"And expectations of normalization in monetary policies of advanced economies are more pronounced, while a monetary tightening trend is foreseen for 2019 in some emerging economies," the bank said in its 26th volume of financial stability report.
"Global economic growth maintains a positive outlook despite rising protectionist trends and geopolitical risks," the CBRT noted.
The bank stated that the fall in global economic policy uncertainty turned into a rise again as a result of U.S.-led developments and changes in global trade policies while a discrepancy between advanced economies with respect to the economic policy outlooks was seen.
"Indeed, together with uncertainties regarding protectionist trade policies and other accommodative fiscal policy expectations, the predictability of economic policy in the U.S. has reduced," the bank said.
Regarding the completion of elections and the Brexit process, the CBRT said: "The economic policy uncertainties in the EU and the UK have partially declined."
"In addition to the acceleration in global economic activity, there was an increase in portfolio flows towards emerging economies thanks to the increasing global risk appetite in the first quarter of 2018 together with the positive growth outlook in emerging economies," it said, adding:
"However, owing to the tightening in the global financial conditions since April 2018 and the decline in risk appetite, a weakening in net portfolio flows towards emerging economies has been observed."
The CBRT stated that domestic economic activity in Turkey preserves its strong trend with measures taken as well as domestic final demand increased through public expenditures.
"Industrial production and employment developments indicate that the positive outlook will prevail in 2018," the bank said.
"Credit growth driven by strengthening of firm collateral especially by the Credit Guarantee Fund (KGF) and with the effects of measures and incentives provided in 2017, converges to long run path as economic activity normalizes," it said.
Noting the Turkish banking sector's non-performing loan ratio is below 3 percent, the CBRT said: "The banking sector maintains a stable outlook on its asset quality."
"Banking sector profitability indicators have preserved their strong levels in the current report period," it said. "There is no significant change in the composition of risk weighted assets."
"The spread of the US-led protectionist tendencies in foreign trade onto the global scale, the tightening in financial conditions, low profitability in the EU banking system with high non-performing loan ratios of some major EU banks in particular, and geopolitical developments are among the risk factors for global financial stability," the CBRT said.
"Nevertheless, the Turkish banking sector remains resilient against the aforementioned risks given its strong capital base and high return-on-equity ratios, sound asset quality and adequate level of liquid assets."
The CBRT has been publishing its financial stability report twice a year since 2005 to focus on the global and domestic macroeconomic outlook along with the most recent developments.