Turkey’s economy is expected to shrink by 3.8 percent in 2020, according to the World Bank’s (WB) Global Economic Prospects report published Tuesday for June.
In its January report, the WB expected the Turkish economy to grow by three percent in 2020 but later published a review over the Q1 2020 in April dropping the rate to 0.5 percent.
The WB also revised its forecast on the Turkish economy’s growth for the year 2021. In its reports published in January and April, it expected growth in Turkey's GDP by four percent, but raised this percentage to five in June’s report.
The WB’s forecasts come in line with those of Moody’s credit rating agency, which expected Turkey’s economy to shrink by five percent at the end of this year.
The agency had previously expected the Turkish economy to shrink by 1.4 percent, but it adjusted this forecast, which is contrary to statements by Turkish economic officials in this regard.
Treasury and Finance Minister Berat Albayrak said he remains optimistic the country will meet its five percent growth target by the end of 2020.
In a previous report, Moody’s dropped its forecasts for the Turkish economy’s growth from three percent growth to 1.4 percent shrink due to the coronavirus outbreak.
“Risk aversion among international investors will translate into constrained market access for Turkish banks, partly offset by lower loan demand.”
Banks with high exposure to small and medium-sized enterprises, along with the tourism and transportation industries, will be particularly affected, the ratings agency said in its report.
It stressed that lower lending volumes for banks and higher provisions for loan-losses would pressure profitability, while there would be additional capital strain caused by currency depreciation.
“The authorities' support measures will only partly offset the weakening of the credit profiles of Turkish banks,” it noted.
