- EBRD cuts its 2023 growth forecast for Türkiye to 2.5 per cent
- Earthquake impact takes a toll, credit tightening expected
- External vulnerabilities remain, as current account gap widens and FX pressures intensify
The downward revision reflects the impact of the February earthquakes, as well as expected credit tightening due to the need to address the country’s external imbalances in the second half of year.
The forecasts were published today in the Bank’s Regional Economic Prospects report, which made a slight downward adjustment of 0.1 per cent to output for the EBRD regions as whole in 2023.
Leading economic indicators suggest that Türkiye saw a strong start to 2023, the report says. The output shock associated with the natural disasters is expected to be less than 1 per cent this year. Official estimates put the damage inflicted by the earthquakes at more than US$ 100 billion, implying a significant reconstruction burden.
Türkiye’s external vulnerabilities remain, too, according to the report, with the current account deficit continuing to grow in the early months of the year. The report identifies the country’s increasing short-term external debt, low levels of foreign-exchange reserves and increasing pressure on the Turkish lira as further weaknesses.
Despite robust household and government spending that may have had a positive effect on growth in the early months of 2023, the report cites uncertainty surrounding post-election economic policies as a defining factor in the economy’s progression.
Earthquake-related reconstruction is likely to support growth in 2024, and the Bank expects the economy to expand by 3.0 per cent.
To date, the EBRD has invested more than €17.3 billion in various sectors of the Turkish economy, largely in the private sector.