As Covid cases rise, growth forecasts become gloomier

Turkey has managed to stabilize daily Covid-19 cases in high triple-digits, but three members of the National Science Board warned the public that wide-spread ignorance of protection and social distancing measures poses the threat of a second wave of infections.  As Turkey’s economy gradually advances on the path to full normalization, and many households still shy to consume, a second wave could cause “W” shaped economic activity pattern, dealing a lethal blow to Finance minister Berat Albayrak’s hope of finishing the year with positive GDP growth. Already, supra-nationals like World Ban and OECD marked Turkey as one of the poorest performers in the EM universe.

Pessimistic growth forecast from the World Bank: Minus 3.8%!

According to the World Bank, Turkish economy will shrink this year, and will gain momentum in 2021.

Minister of Finance and Treasury Berat Albayrak, has announced that he is predicting positive growth for Turkey’s economy this year. However, he remains alone in this regard. Although many economists predict that performance will recover rapidly in the second half of the year, consensus is that GDP will shrink this year.

The World Bank also announced in its mid-year  report a 5.1% shrinkage of the global economy. Turkey is included in the Emerging Countries group, which will shrink 2.6% as a whole. This will be the first recession for Developing world in the lats 60 years.  

As part of the report, Turkish GDP forecast was revised downward for 2020.

The World Bank had revised GDP growth forecast downward for Turkey for the year 2020. In the “Global Economic Outlook” report published in January, the World Bank predicted that the Turkish economy would grow by 3.0 percent in 2020, but revised this expectation as 0.5 percent in the report published in April. In its mid-year report, the forecast changed to a  3.8% contraction.

The World Bank has also revised its estimates for 2021. In January and April reports, which expressed the GDP growth forecast at 4.0 percent for Turkey, the mid-year estimate rose to 5.0 percent.

In its current report, the World Bank announced its 2020 GDP growth forecast for the global economy as 7.7 percent contraction, decreasing by 7.7 points compared to the report in January. It increased its 2021 growth forecast from 2.6 percent to 4.2 percent.

In the June Global Economic Outlook report, the World Bank revised its 2020 growth forecast as 6.1 percent contraction, which was 1.8 percent growth in January, and increased its 2021 growth expectation from 1.7 percent to 4.0 percent. Revising its 2020 forecast, which was announced as 1.0 percent growth for the Euro Area in January, as a 9.1 percent contraction, the World Bank increased its forecast for 2022 from 1.3 percent to 4.5 percent.

Expecting the developed economies to shrink by 7.0 percent in 2020, the World Bank predicted that the emerging market countries and developing economies will contract by 2.5 percent in 2020 and grow by 4.6 percent in 2021.

What did other organizations predict?

In its report for Turkey GDP in Q1 2020 BBVA, estimating  zero growth this year, was the most optimistic forecast we encountered. The economy will shrink 2.2% this year, according to Standard Chartered. EBRD predicted that the Turkish economy will contract by 3.5 percent in 2020, and that it expects a strong growth of 6.0 percent in 2021. The EBRD stated in a statement in November that it expects the Turkish economy to grow 2.5 percent in 2020. Fitch’s previous forecasts announced in 2020 that it expects Turkey’s economy shrinking 2 percent due to the outbreak of the corona. Fitch revised this estimate to 3 percent. Fitch announced that Turkey in 2021 will grow 5 percent.

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Published By: Atilla Yeşilada

GlobalSource Partners’ Turkey Country Analyst Atilla Yesilada is the country’s leading political analyst and commentator. He is known throughout the finance and political science world for his thorough and outspoken coverage of Turkey’s political and financial developments. In addition to his extensive writing schedule, he is often called upon to provide his political expertise on major radio and television channels. Based in Istanbul, Atilla is co-founder of the information platform Istanbul Analytics and is one of GlobalSource’s local partners in Turkey. In addition to his consulting work and speaking engagements throughout the US, Europe and the Middle East, he writes regular columns for Turkey’s leading financial websites VATAN and and has contributed to the financial daily Referans and the liberal daily Radikal.