Turkey overview

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Turkey cityscape

The EBRD will focus on the following strategic priorities in Turkey for 2019-2024:

  • strengthening resilience of the financial sector and develop domestic capital and financial markets;
  • fostering Turkey’s knowledge economy and higher value-added activities, and promote good governance;
  • promoting economic inclusion and gender equality through private sector engagement;
  • accelerating Turkey’s green economy transition and regional energy connectivity.

As well as being a country of operation, Turkey is also a donor to the EBRD with a total contribution of €31 million. Turkey established its first bilateral donor fund with EBRD in January 2019, for an amount of €25 million.  The fund aims to support projects in Turkey, Azerbaijan, Moldova, Romania and the Kyrgyz Republic, with the potential to also support Moldova. The fund prioritises projects for SME development, financial sector stability, sustainable infrastructure, energy efficiency, governance and economic inclusion.  In 2013, Turkey provided EU funding to EBRD for its Women in Business programme.

The EBRD’s latest Turkey strategy was adopted on 24 July 2019.

Watch this video and hear from some of the people and projects we have supported in Turkey. From women entrepreneurs to small businesses, green projects as well as large scale infrastructure - we're doing more than ever before in Turkey.

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Turkey's policy response to the coronavirus crisis

The EBRD is monitoring Turkey's policy response to the coronavirus pandemic. Our biweekly publication identifies the major channels of disruption as well as selected impact and response indicators.

Learn more

Current EBRD forecast for Turkey’s Real GDP Growth in 2020 -3.5%

Current EBRD forecast for Turkey’s Real GDP Growth in 2021 5.0%

Significant policy loosening and credit growth enabled the Turkish authorities to engineer a consumption-led recovery in 2019 (after recession in 2018) but the impact of the Covid-19 pandemic saw the economy move back into recession in the first half of 2020. The economy contracted by 9.9 per cent year-on-year in the second quarter of 2020 as the combined impact of a huge contraction in external demand, domestic lockdowns and supply chain restrictions caused the services and manufacturing sectors to suffer heavily and exports to collapse.
Leading indicators suggest that the real economy has bottomed out and is recovering, as of September 2020, but this nascent recovery could be threatened by a resurgence in the pandemic. The authorities had succeeded in generating relative macroeconomic stability over the past year but this stability is looking increasingly fragile. Continued stimulus, particularly in the form of huge credit growth, amounting to 25 per cent in the first half of 2020, has drawn in imports, causing the current account to move back into deficit. The widening current account deficit and continued large external financing requirement in the context of a critically low level of foreign exchange reserves has given investors cause for concern. Moreover, weak external demand means the ongoing weakening of the lira has had only a limited impact on exports. The positive impact on the current account of recent discoveries of natural gas reserves in the Black Sea will only be seen in the medium term.
Although inflation has been steady in lower double digits for some time, there are concerns about inflationary pressures owing to the fact that rate cuts amounting to a cumulative 1375 basis points since July 2019 have pushed Turkey’s real policy rates intonegative territory. The Central Bank’s attempts toavoid politically-difficult rate hikes had compounded investor anxiety and, given the economy’s dependence on foreign capital, put further downward pressure on the lira, which has weakened by 25 per cent against the US dollar so far this year, reaching historic lows. September’s 200 basis point policy rate increase was welcome, but its impact remains to be seen.
The contractions in the real economy, notably the tourism, retail and export sectors, are likely to put further stress on the already strained asset quality of banks, particularly in light of the large foreign exchange-denominated debt overhang in the corporate sector. The government has recently curtailed its efforts to spur bank lending but the unprecedented credit growth in the first half of 2020 may lead to further asset quality deterioration down the road. Growth has been heavily impacted by the coronavirus pandemic in 2020. GDP is expected to contract by 3.5 per cent in 2020, followed by a robust recovery to 5.0 per cent growth in 2021. There are significant risks surrounding this forecast, which is heavily dependent on success in containing the pandemic and thus boosting both domestic and external demand.


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