JP Morgan raises Turkey's growth forecast

Economy Materials 13 February 2021 08:43 (UTC +04:00)
JP Morgan raises Turkey's growth forecast

JP Morgan raised its expectations for Turkish economic growth for both 2020 and this year based on strong private-sector performance throughout the coronavirus pandemic, while the Turkish lira has cemented its position as the top-performing emerging market (EM) currency this year, Trend reports citing Daily Sabah.

The Wall Street bank hiked its 2020 view to 1.9% from 1.1%, while it raised the forecast for this year to 4.6%, from 3.3% previously, according to its report.

“Turkey over-performed most of its peers during the pandemic,” bank analysts said in a client note.

Despite containment measures such as lockdowns, domestic demand was quite resilient in the fourth quarter of 2020, the report said.

The Turkish economy’s growth figures always “surprises to the upside,” mirroring the robustness and flexibility of the Turkish private sector, it noted.

A burst of state bank-driven lending led to a strong rebound in the second half of 2020 as Turkey’s gross domestic product (GDP) soared to a more-than-expected 6.7% growth rate in the third quarter.

It had contracted by 9.9% in the previous three months when lockdowns were imposed to curb the initial COVID-19 wave.

Central Bank of the Republic of Turkey’s (CBRT) new Governor Naci Ağbal this week said the economy was expected to have grown by 7% to 8% in the last quarter of 2020.

This could bring the overall 2020 growth to around 2.5%, he added. Ağbal also said the economy could grow up to 5% in the January-March period, given the economic activity in January and February.

A survey of business leaders and economists, also published Friday by the central bank, forecast the economy would log growth of 4.1% by the end of the year.

Underlining the country’s experience in handling crises in previous years, JP Morgan's report highlighted it was not particularly surprising that Turkey outshined its peers amid the outbreak.

It pointed out that one of the main reasons for this outperformance was the massive government-led credit growth in the first half of last year, supporting the economy to recover from the pandemic.

“Tighter financial conditions and ongoing lockdowns will remain a drag, but the carryover from 2020 will be much larger than projected earlier and the contribution from net exports could be larger,” it said.

The report also underlined that this year, the economy could see higher growth, given the more promising expectations for the tourism sector’s performance, as well as the vaccination process.