The European Bank for Reconstruction and Development (EBRD) has predicted in its latest Regional Economic Prospects report that Turkiye’s earthquake-hit economy will grow 2.5 percent in 2023.
This was lower than the 3 percent growth GDP expansion forecast in the previous report.
Turkish growth is expected to reach 3 percent in 2024, according to the development bank.
The downward revision for 2023 reflects the impact of the February 2023 earthquakes -not reflected in the previous forecast- as well as expected credit tightening in the second half of 2023, the bank explanied.
“Leading economic indicators suggest a strong start to 2023, though the adverse impact of the earthquakes in February are becoming apparent.”
While the output shock associated with the disasters is expected to be less than 1 per cent this year, official estimates put the damages inflicted by the earthquakes at over $ 100 billion, implying a significant reconstruction burden, it added.
There is considerable uncertainty regarding the direction of economic policies after the elections, according to the bank.
“Regardless of the elections’ outcomes, the authorities will need to take steps to address the growing external imbalances, which are likely to weaken economic activity during the second half of the year,” it said.
Earthquake-related reconstruction is likely to support growth in 2024, when the economy is expected to expand by 3 per cent, it added.
Earlier this week, the European Commission forecast that the Turkish economy will grow 3.5 percent in 2023. The GDP growth will accelerate to 4 percent next year, accordinf to the commission’s Spring Economic Forecast.
“The devastating earthquakes caused erious damage to the capital stock, darkening the short-term outlook,” the report said.
“However, confidence rebounded quickly and reconstruction efforts are expected to add to the large pre-electoral boost in domestic demand, which is forecast to remain the main driver of growth.”