The World Bank increased Turkiye’s economic growth forecast for this year from 3.2% to 4.2%.
The World Bank published the Economic Update Report prepared for the Europe and Central Asia region under the title “Slow Growth, Increasing Risks”.
According to the report, which also includes evaluations of the Turkish economy, the country’s economic growth forecast was increased from 3.2% to 4.2% due to resilient consumer demand and decreasing policy uncertainty.
The report noted that the Turkish economy is expected to grow 3.1% next year and 3.9% in 2025.
In its predictions in June, the World Bank predicted that the Turkish economy would grow 4.3% in 2024 and 4.1% in 2025.
The report stated that Turkiye’s second quarter growth of 3.8% was also positively surprising, as consumption increased at double-digit rates and government spending continued its strong course.
The report points out that a change towards more normalization has begun in monetary policy, with the Central Bank of the Republic of Turkiye (CBRT) increasing policy rates by 2 thousand 150 basis points cumulatively since May. In the report it was reported that debt and stock portfolio inflows have accelerated since the elections, relieving the pressure on foreign exchange reserves.
Upward revision to the economic growth forecast for the Europe and Central Asia region
In the report, it was stated that the growth forecast for 2023 for the emerging markets and developing economies in the Europe and Central Asia region was increased from 1.4% to 2.4%. The report also stated that the acceleration in growth reflects the improvement in forecasts for war-affected Ukraine and Central Asia, consumer resilience in Turkiye, and better-than-expected growth in Russia thanks to the increase in public expenditures on military and social transfers.
The report emphasized that when Russia and Ukraine are excluded, the region is expected to grow by 3% this year, and that growth remains weak compared to long-term averages before the COVID-19 outbreak.
In general, the report points out that growth is expected to be slower or show little change this year compared to 2022 in half of the countries in the Europe and Central Asia region. It was reported that in the 2024-25 period, growth is expected to be 2.6% annually due to weak growth in the European Union, the region’s largest trading partner, high inflation, tightening financial conditions and the spillover effects of the Russia-Ukraine War.
Downside risks cloud the outlook
The report stated that downside risks overshadow the outlook for emerging markets and developing economies in the Europe and Central Asia region, and noted that inflation may continue to remain at high levels in the face of high volatility in global commodity markets and the rapid increase in energy prices.
The World Bank’s report underlined that global financial markets may become more volatile and restrictive due to tightening financing conditions. In the report it was stated that Ukraine’s economy is expected to grow 3.5% this year, after contracting 29.1% in 2022, thanks to more stable electricity supplies, increased public spending, continued donor support, better harvests and the rerouting of some exports through the country’s western borders.
It was also reported that increasing public expenditures and resilient consumption are expected to provide 1.6% growth in 2023 in Russia and growth is expected to weaken due to capacity constraints and slowing consumer demand, falling to 1.3% in 2024 and 0.9% in 2025.
Source: Trthaber / Prepared by Irem Yildiz