On Monday, Fitch Rating’s said that the Turkish economy would be able to catch up with its sustainable trend of growth in 2021.
Douglas Winslow, a sovereign team director of the agency expected the country’s economy would encounter a very sharp contradiction in the second quarter after posting a 6% growth in the first quarter before the coronavirus outbreak.
In the third quarter, the growth would be flat and would start to recover in the fourth quarter after the economic activities begin to normalize after the virus subdued.
In 2021, Turkey’s gross domestic product (GDP) is estimated to expand by 4.5% and 0.8% in 2020 despite the global contraction.
Winslow mentioned a strong momentum early this year due to the recovery in private bank lending combined with the lower interest rate as part of the reason behind the optimistic view of this year’s growth.
He also said that the country’s Economic Stability Shield and other measures to support lending in the state banks would provide some support to the economic activity to some degree.
In March, Turkey released a relief package worth TRY100 billion (USD15.4 billion) to contain the impact of the pandemic.
However, Fitch warned the country that the Eurozone’s economy would shrink by 4.2% this year, which would impact Turkey’s net exports. The agency said that the benefits to the Turkish economy from lower imports and any potential relocation of export capacity would be offset by the Eurozone’s economic condition.
The year-end inflation rate prediction was cut to 8.5 % on account of weaker GDP growth. Fitch also expected the interest rates to be cut by 100 bp to 8.75% at the end of this year.
