Turkey sees slight growth this year despite pandemic

Turkey's economy contracted 9.9% in the second quarter as a lockdown brought activity to a near standstill, its worst year-over-year performance in a decade, but has since begun to recover. Presenting Turkey's new medium-term programme, Berat Albayrak said GDP growth would slow in the fourth quarter compared to the third quarter, but would accelerate to 5.8% in 2021.


Reuters | Istanbul | Updated: 29-09-2020 17:11 IST | Created: 29-09-2020 16:56 IST
Turkey sees slight growth this year despite pandemic
Representative Picture. Image Credit: Pixabay
  • Country:
  • Turkey

Turkey's economy is set to grow 0.3% this year as it recovers from the impact of the coronavirus pandemic, its finance minister said on Tuesday, pledging more normalization steps to boost the economy as he set out the country's medium-term plan. Turkey's economy contracted 9.9% in the second quarter as a lockdown brought activity to a near standstill, its worst year-over-year performance in a decade, but has since begun to recover.

Presenting Turkey's new medium-term program, Berat Albayrak said GDP growth would slow in the fourth quarter compared to the third quarter but would accelerate to 5.8% in 2021. However, he warned the economy may shrink 1.5% this year in a worst-case scenario and grow 3.7% next year. In the past two months, daily coronavirus cases have picked up again in Turkey, where there have been a total of more than 315,000 cases. More than 8,000 people have died.

Economic data "points to a strong V-type recovery in the economy from the third quarter and a clear turn to positive growth figures", Albayrak said, adding Turkey was diverging positively from economies of many developed and developing countries. But areas such as tourism, transport, and the services sector generally had not yet recovered to the desired level. "It is of vital importance to revitalize the services sector which employs around 15 million of our people," he said.

Referring to recent steps taken on interest rates, liquidity, swaps, and asset ratios, Albayrak said: "Normalisation steps will continue in the coming days and weeks. They will contribute to financial stability and our macroeconomic goals." Support packages to combat the coronavirus so far had amounted to 494 billion lira ($63 billion), or 10% of gross domestic product, he said.

Gold imports and losses in tourism income due to the coronavirus lockdown prevented a current account surplus in 2020, but Turkey aimed to improve its current account balance and provide sustainable growth, he said. The program forecast a current account deficit of $24.4 billion, or 3.5% of GDP this year. The budget deficit was seen at 239.2 billion lira or 4.9% of GDP.

His presentation had a little immediate impact on the lira, which hit a fresh record low of 7.8550 against the dollar on Tuesday on concerns about the Caucasus conflict. Bankers calculated that the government assumed a much lower exchange rate for its forecasts.

Last week Turkey's central bank unexpectedly hiked interest rates by 200 basis points to 10.25%, tightening policy for the first time in two years to stabilize the lira and address inflation. The program showed annual inflation was expected to be 10.5% in 2020, before falling to 8% in 2021 and 4.9% in 2023. Unemployment was seen falling to 10.9% in 2023 from 13.8% this year. 

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)

Give Feedback