World Bank raises Turkey's 2023 economic growth forecast

The World Bank has published its Economic Update Report for the Europe and Central Asia region, titled "Slow Growth, Rising Risks."

In the report, which also includes assessments of the Turkish economy, it was stated that the country's economic growth forecast was raised from 3.2 percent to 4.2 percent due to resilient consumer demand and reduced policy uncertainty.

The report noted that the Turkish economy is expected to grow by 3.1 percent next year and 3.9 percent in 2025.

In its June forecasts, the World Bank had projected that the Turkish economy would grow by 4.3 percent in 2024 and 4.1 percent in 2025.

The report stated that Turkey's 3.8 percent growth in the second quarter also provided a positive surprise, driven by double-digit growth in consumption and the continued strength of government spending.

Pointing out that a shift toward further normalization in monetary policy has begun with the Central Bank of the Republic of Turkey (CBRT) raising policy rates by a cumulative 2,150 basis points since May, the report noted that debt and equity portfolio inflows have accelerated since the elections, easing pressure on foreign exchange reserves.

UPWARD REVISION IN ECONOMIC GROWTH FORECAST FOR EUROPE AND CENTRAL ASIA REGION

The report stated that the 2023 growth forecast for emerging markets and developing economies in the Europe and Central Asia region has also been raised from 1.4 percent to 2.4 percent. The report also indicated that the acceleration in growth reflects improvements in forecasts for war-affected Ukraine and Central Asia, consumer resilience in Turkey, and better-than-expected growth in Russia due to the increase in public spending on military and social transfers.

The report emphasized that excluding Russia and Ukraine, the region is expected to grow by 3 percent this year, with growth remaining weak compared to long-term averages before the COVID-19 pandemic.

Overall, the report pointed out that growth in half of the countries in the Europe and Central Asia region is expected to be slower or show very little change this year compared to 2022, and it was reported that in the 2024-25 period, growth is projected to be 2.6 percent annually due to weak growth in the European Union, the region's largest trading partner, as well as high inflation, tightening financial conditions, and the spillover effects of the Russia-Ukraine War.

DOWNSIDE RISKS OVERSHADOW THE OUTLOOK

Stating that downside risks overshadow the outlook for emerging markets and developing economies in the Europe and Central Asia region, the report noted that inflation may remain at high levels in the face of high volatility in global commodity markets and rapid increases in energy prices.

The World Bank's report underscored that global financial markets could become more volatile and restrictive due to tightening financing conditions.

The report stated that the Ukrainian economy is expected to grow by 3.5 percent this year following a 29.1 percent contraction in 2022, thanks to more stable electricity supply, increased public spending, ongoing donor support, better-than-expected harvests, and the redirection of some exports through the country's western borders.

It was also reported that in Russia, increased public spending and resilient consumption are expected to provide 1.6 percent growth in 2023, while growth is projected to weaken to 1.3 percent in 2024 and 0.9 percent in 2025 due to capacity constraints and slowing consumer demand.

News Source: AA