Growth forecast for Turkish economy from Fitch: Increase from 2.5% to 2.8% for 2024

International credit rating agency Fitch Ratings increased its growth expectation for the global economy by 0.3 points to 2.4% this year. The growth forecast of the Turkish economy for this year was increased from 2.5% to 2.8%.

Fitch published the March issue of the Global Economic Outlook Report with the title “Growth Outlook Is Improving, But Inflation Continues”.

In the report, it was noted that due to the improvement in short-term growth expectations, the growth forecast for this year was increased by 0.3 points to 2.4%.

The report stated that this upward revision reflects the sharp revision of the growth forecast for the US economy from 1.2% to 2.1%. It was stated that the revision for the US economy “outweighs” the reduction of China’s growth forecast for this year from 4.6% to 4.5% and the reduction of the expectation for the Euro Zone from 0.7% to 0.6%.

In the report, it was reported that the growth forecast for emerging markets excluding China was increased by 0.1 point to 3.2%, and the growth forecasts for India, Russia and Brazil were increased.

In Fitch’s report, it was noted that the expectation that the world economy will grow by 2.5% in 2025 is maintained, as the Eurozone recovers with increases in real wages and consumption, but the growth of the United States slows down.

Expectation of 3 interest rate cuts from the Fed and ECB by the end of the year

The report stated that the unprecedented cyclical expansion in the fiscal deficit in the USA last year increased domestic demand and helped explain the surprising flexibility of economic growth, but it was stated that fiscal momentum is expected to decrease in 2024 and the increase in household income to slow down.

The report stated that they expect quarter-to-quarter growth to slow to a rate significantly below trend later this year, as the lagged effects of last year’s monetary tightening continue to emerge as real interest rates rise.

The report noted that the Eurozone continues to stagnate, with the pressure created by the recession in Germany on France and the rest of the bloc, and noted that the German economy faces structural growth constraints, but is also affected by a series of major shocks that are unlikely to be repeated. The report stated that growth is expected to accelerate in the medium term as the European Central Bank (ECB) cuts interest rates, world trade recovers and the impact of the energy shock decreases.

The report stated that the collapse in the real estate market in China continues unabated, and that the evidence of deflationary pressures has increased, but fiscal relaxation has been significantly increased, which alleviates the impact on the GDP forecast.

The report stated that the US Federal Reserve (Fed) and the ECB are expected to cut interest rates three times by the end of the year, totaling 75 basis points, however, it was reported that both banks wanted to see more evidence that the recent decline in inflation was permanent before starting the policy easing process.

In the report, it was stated that Fitch’s expectation regarding the date of the Fed’s first interest rate cut was postponed from June to July, and that the ECB’s predictions regarding the date of the first interest rate cut were also postponed from April to June.

Turkiye’s growth expectation for this year has been increased to 2.8%

The report, which also includes evaluations of the Turkish economy, stated that the country’s economy grew by 1% on a quarterly basis in the last quarter of last year, above expectations, and that the increase in private consumption was effective in this.

The report noted that the economic momentum is expected to continue in the first quarter of this year, considering the latest developments in the PMI index, consumer confidence and other high-frequency indicators.

In Fitch’s report, it was stated that short-term economic gains indicate that growth will be higher this year, and the growth forecast of the Turkish economy for this year was increased from 2.5% to 2.8%.

The report noted that the Turkish economy is estimated to grow by 3.1% in 2025.

Source: / Prepared by Irem Yildiz

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