IMF lowers Turkey growth forecasts

The International Monetary Fund (IMF) revised up its global economic growth forecast to 4.9% for 2021, according to its World Economic Outlook Update released Tuesday.


The 0.5 percentage points upgrade is a revision from a previous estimate of 4.4% made in its April report.


The IMF said the revision “derives largely from the forecast upgrade for advanced economies, particularly the US, reflecting the anticipated legislation of additional fiscal support in the second half of 2021 and improved health metrics more broadly across the group.”


Overall, advanced economies are expected to expand 4.4% in 2022 from 3.6%, while the forecast on emerging markets and developing economies was revised up to 5.2% from 5%.



IMF cut its 2021 GDP growth forecast for Turkey from 6.0% 5.8% and more importantly its 2022 forecast from 3.5% to 3.3.%.  Inflation forecasts are not yet available for individual countries.


Chief Economist Gita Gopinath wrote in a blog that  in emerging market and developing economies most measures expired in 2020 and they are looking to rebuild fiscal buffers. Some emerging markets like Brazil, Hungary, Mexico, Russia, and Turkey, have also begun raising monetary policy rates to head off upward price pressures.


WATCH:  Real Turkey featuring Mehmet Ogutcu: World after the pandemic—where does Turkey fit in?


While Turkey is not specifically mentioned, some of Gopinath’s comments fit Turkey as if tailor-made


“Further, inflation is expected to remain elevated into 2022 in some emerging market and developing economies, related in part to continued food price pressures and currency depreciations—creating yet another divide”, she commented.



The most noteworthy  remark is “Third, long-term inflation expectations (as measured by surveys and market-based measures) remain well-anchored, and factors such as automation that have lowered the sensitivity of prices to changes in labor market slack likely have intensified through the pandemic”.


WATCH:  Turkish Economy IS in Crisis | Real Turkey


For Turkey, the well-anchored inflation expectations part is not true, but shows clearly that Turkey’s inflation problem is created by domestic developments, rather than  global trends.  In other words, at a time when inflation is expected to move to a lower path, this will not be case for Turkey.


As importantly, Turkey’s labor force is not skilled enough to adopt to the Industry 4.0 world. Lack of skilled labor is certain to keep unemployment rates high, as well as thwarting total factor productivity growth.


Finally, it is remarkable that while IMF revised its forecasts upward for 2022 growth for the universe of Developing Economies, Turkey stands out like a sore thumb.


IMF’s longer-term GDP forecast for Turkey is realistic and ought to be taken into consideration by investors.  Years of erratic economic management, arbitrary decisions by Erdogan and the hallowing-out of growth-promoting institutions such as an efficient and independent judiciary, sapped Turkey off her growth potential.


PA Turkey staff, IMF website


Follow our  English language YouTube videos  @ REAL TURKEY:


And content at Twitter: @AtillaEng

Facebook:  Real Turkey Channel:


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.