The Turkish economy has been successful in showing resilience against various shocks to continue expanding, Fitch Ratings senior director and primary rating analyst Erich Arispe Morales said on Nov. 5.
Turkey’s financial sector acts as an “anchor” for the economy, he added. The international rating agency expects Turkey’s gross domestic product (GDP) to rise 9.2 percent this year with support from “strong domestic demand, strong recovery in production and net foreign demand,” he told Anadolu Agency.
Fitch Ratings estimates that the Turkish economy will continue growing 3.5 percent next year and 4.5 percent in 2023, according to Morales’ remarks.
With rising energy prices and depreciation of the Turkish Lira, inflation rate is expected to stand at 17 percent this year, before dropping to 13 percent in 2022, he added.
Strong tourism numbers will help Turkey bring current account deficit ratio to GDP down to 3 percent in 2021 and 2.3 percent next year, claims Morales.
The rating agency will also consider if extraordinary stimulus policies will be introduced ahead of the elections in 2023, Fitch warned. Such a fiscal stimulus package is currently in the works, according to Turkish press agencies. The timing of implementation remains vague, though comments from line ministers suggest the unveiling could take place in January, 2022. The stimulus measures is reported to contain 20% hike in statutory minimum wage, top-ups to salary scales for a large segment of civil servants, as well as adjustments to Social Security Law to ease the plight of roughly 6 mn workers who can’t collect pension, even though they have been officially retired, on account of not meeting the retirement age floor.
Another rating agency, Moody’s had revised upwards GDP growth forecast for Turkey on Nov. 4.
Moody’s now expects Turkish economy to expand 9.2 percent and 4.8 percent in 2021 and 2022, respectively. “Monetary and credit expansion and ample liquidity support continue to boost Turkey’s credit-fueled recovery. We now expect real GDP growth of around 9 percent in 2021, up from our previous estimate of 6 percent,” noted its “Global Macro Outlook 2022-23” report.
“However, the policies fueling headline economic growth come at the cost of exacerbated pre-pandemic vulnerabilities – wider external imbalances, rising corporate leverage, high inflation, and further depreciation of the lira,” it added.
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Moody’s said it forecast an inflation rate of 19 percent for the end of 2021 in Turkey, and above 16 percent at the end of 2022.
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