World Bank boosts Turkey’s growth forecast

The World Bank has revised upwards its 2023 and 2024 GDP growth estimates for the Turkish economy in its Europe and Central Asia Economic Update report.

The bank expects the Turkish economy to expand at 3.2 percent in 2023, up from a previous 2.7 percent, while it lifted its growth estimate for 2024 from 4 percent to 4.3 percent.

The Washington-based development lender forecast a 4.1 percent for the Turkish economy in 2025.

The forecast for 2023 growth is higher than previously projected as the drag from the earthquakes is more than offset by positive momentum from late 2022 and additional government support to households, including from the early retirement scheme, the bank said.

Investment is also expected to be stronger than previously envisioned, assuming that reconstruction efforts proceed rapidly, and policy uncertainty somewhat dissipates following the presidential election in May, according to the bank.

“Assuming a normalization in macroeconomic policies, growth is forecast to accelerate and increase to an average of 4.2 percent over 2024–25, underpinned by investment amid ongoing reconstruction efforts.”

The report added that direct physical damage from the initial earthquakes is estimated at about 4 percent of 2021 GDP, but overall economic damages, including from indirect and secondary impacts on growth, could be at least twice as large.

“Moreover, while the affected regions account for only about 9.4 percent of Türkiye’s output, these areas are highly productive in the agriculture sector. Damage to or the inability to work on arable land because of the earthquakes could put further upward pressure on food prices and exacerbate food insecurity.”

The Turkish economy grew by 5.6 percent in 2022. The GDP growth slowed from 4 percent year-on-year in the third quarter of last year to 3.5 percent in the final quarter, with quarter-on-quarter growth accelerating to 0.9 percent from a contraction of 0.1 percent.