Turkey to unveil economic reforms in March, GDP data due next week


Turkey will unveil details of its new economic reform policies in the second week of March, the treasury and finance minister said, while data next week is expected to show that the Turkish economy was among the few that ended the coronavirus pandemic-ravaged 2020 with a growth.

“We have come to the end of our economic reform work, which includes macroeconomic stability policies and structural policies,” Lütfi Elvan said on Twitter on Thursday.

Elvan stressed that 2021 would be a year of reforms for Turkey.

President Recep Tayyip Erdoğan late last year pledged a new economic era and promised a slate of economic and judicial reforms, which he said would raise the standards for democratic rights and freedom.

He on Wednesday said a human rights action plan would be announced next week.

Economic reforms are expected to focus on investment, production, export and employment.

“I hope we will reveal our determination to grow our country once again by announcing our economic reform package,” the president noted.

Top Turkish officials have held negotiations on the reforms with key business leaders over recent months.

Elvan had said Turkey would maintain fiscal discipline and would focus on sustainable and “high quality” economic growth policies in the coming period to increase employment.

2.3% GDP growth in 2020

Turkey’s economy is expected to have grown at a hot 7.1% pace in the fourth quarter and to have logged 2.3% growth in 2020 as a whole, emerging as one of the few countries to avoid a contraction amid the pandemic, a poll showed on Wednesday.

The Turkish Statistical Institute (TurkStat) is expected to announce fourth-quarter gross domestic product (GDP) data at 7 a.m. GMT on March 1.

The major emerging market (EM) economy expanded 4.5% year-on-year in the first quarter when social and business curbs were imposed, leading to a 9.9% contraction in the second. It rebounded 6.7% in the third quarter as state banks offered cheap credit and as restrictions were lifted.

The median forecast in a Reuters poll of 16 economists for the October-December quarter was for 7.1% year-on-year growth with estimates ranging between 3% and 8.3%. The median estimate of 2.3% for 2020 was based on 19 respondents.

Last year the government had forecast GDP growth of 0.3%.

For 2021, the GDP is estimated to grow by 4.5% as the economy continues to rebound, according to the median estimate of 11 economists in the Reuters poll.

A number of international financial institutions have recently revised upward their growth forecasts for the economy for both 2020 and 2021.

These included the International Monetary Fund (IMF), Wall Street banks JP Morgan and Goldman Sachs, Bank of America (BofA), British banking giant HSBC and Moody’s.

In a list of selected large economies, the IMF forecasted expansions in only Turkey, China and Egypt in 2020 due to pandemic fallout, based on its January World Economic Outlook Update.

It said the country’s GDP was expected to have ended 2020 with a growth of 1.2%, up from its previous forecast of negative 5%. It sees the economy growing 6% this year, compared with a previous projection of 5%.

JP Morgan hiked its 2020 view to 1.9% from 1.1%, while it raised the forecast for 2021 to 4.6%, from 3.3% previously. Goldman raised this year’s expectation to 6% growth from 4%.

Moody’s on Wednesday revised its forecast to 1.1% for 2020 from a 5% contraction and to 3.5% for 2021 from 4%.

HSBC expects the country’s GDP to have grown 2% in the whole of 2020, up from its previous forecast of 1%. It sees the economy expanding by 4.2% this year, up from 2.1%.

BofA sees the economy growing by 2.2% in 2020, up from 1% previously, due to strong demand in the final quarter. It raised its 2021 growth forecast to 4.6% from 4.1% previously.

“After historically high credit growth last year to fight the pandemic’s effect on the economy, credit growth is now negative (and the) focus has shifted from growth to price stability in November,” BofA said in a client note.

Faced with a second COVID-19 wave, the government imposed new measures at the end of last year but sought to free up supply and production chains. Ankara is considering lifting some restrictions as of March.

Seen as a precursor to growth figures, industrial production expanded 10.1% year-on-year in the fourth quarter.

“Indicators still show growing demand for manufacturing despite COVID-19 restrictions,” BofA added.

Although the new economy management “is keen on slowing domestic demand to help bring down inflation, pent-up demand and opening of the services sector can put more pressure on inflation.”

Since taking office in November, the new Central Bank of the Republic of Turkey Governor Naci Ağbal has raised the one-week repo rate by 675 basis points to pull the Turkish lira up from a record low and to address inflation.

The bank last week left its benchmark interest rate unchanged at 17% as expected, holding steady for a second month after the two sharp hikes that were meant to cool the price increases.

The bank has maintained its hawkish tone, promising tighter policy if needed to rein in inflation, which edged higher to nearly 15% in January.


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