Moody's growth forecast for Turkey

International credit rating agency Moody's has published the February update of its Global Macro Outlook 2024-25 report, titled "G20 economies' growth to stabilize at slightly lower levels in 2024."

The report states that the global economy is transitioning to a post-Covid-19 equilibrium as economic activity in developed and emerging markets steadily normalizes. It notes that a soft landing appears possible for many developed economies due to favorable factors such as effective policy maneuvers, improving supply-demand balances, and mild winters in Europe.

"FED AND ECB MAY CUT INTEREST RATES IN THE SECOND QUARTER"

In addition to a robust US economy, the report points out that sustainable and stronger-than-expected post-pandemic recoveries in many emerging countries have created a constructive growth picture. It notes that the US Federal Reserve (Fed) and the European Central Bank (ECB) will likely begin interest rate cuts in the second quarter.

The report emphasizes that geopolitical risks and inflation remain potential threats to the economic outlook, and conveys that the global production and trade environment will evolve in line with geopolitical shifts.

Stating that G20 global growth is likely to fall compared to 2022 and 2023 levels, the report projects that G20 economic growth, which was 2.9 percent last year, will be 2.4 percent in 2024 and 2.6 percent in 2025.

The report notes that developed G20 economies are expected to grow by 1.5 percent this year and 1.6 percent next year, while emerging economies are expected to grow by 3.8 percent and 3.9 percent, respectively. It also records that Argentina is the only G20 economy likely to contract this year.

MAJOR CENTRAL BANKS ON THE PATH TO LOWERING INTEREST RATES

The report mentions that the Fed, the ECB, and the Bank of Japan (BoJ) are on the path to lowering and normalizing interest rates, emphasizing that provided inflation remains on a downward trend, major central banks will begin to normalize monetary policy when the time is right.

The report states that Moody's maintains its expectation that the Fed will cut interest rates by 100 basis points in 2024 to the 4.25-4.50 percent range and will make further cuts in 2025, and that the ECB is expected to begin policy normalization in the second quarter.

Pointing out that macroeconomic risks have decreased compared to last year, the report states that geopolitical risks have come to the fore.

The report conveys that key macroeconomic and financial risks include inflation, uncertainty regarding the terminal level of interest rates, and vulnerabilities in the financial sector, and that geopolitical developments continue to pose risks to commodity markets and global trade.

Emphasizing that the ongoing Russia-Ukraine war, conflicts in the Middle East, and tensions across Asia add serious uncertainties to regional and global growth, the report explains that domestic economic and trade policies, as well as technology transfers, will be shaped by foreign policy.

TURKEY IS PROJECTED TO GROW BY 2.5 PERCENT THIS YEAR

In its growth forecasts for this year, Moody's made upward revisions for the US, Indian, and Russian economies and the G20 as a whole, while lowering its expectations for the Eurozone, Germany, Saudi Arabia, and Argentina.

The credit rating agency's report notes that the Turkish economy is expected to grow by 2.5 percent this year and 3 percent next year.

News Source: AA