Turkey’s economy to contract in 2019, longer recession ahead

ANKARA: Turkey’s economy is expected to contract in 2019 after a decade of strong growth, and economists are predicting a longer recession ahead after a recent bout of volatility in the lira, a poll showed.
The Turkish economy contracted 3 per cent in the fourth quarter of last year after a currency crisis devalued the lira by nearly 30 per cent against the dollar. It drove inflation to a 15-year high, severely limited companies’ ability to service foreign debt and multiplied bad loans in the banking sector.
The economy will contract 0.3 per cent this year, the median of a poll of 43 economists showed — well below the government’s sharply lowered forecasts of 2.3 per cent growth. There was a wide range of estimates, from growth of 2.3 per cent and a contraction of 5.0 per cent.
Turkey’s economy last contracted in 2009, by 4.7 per cent. From 2010 to 2017 its compound growth rate was 6.6 per cent thanks to a construction boom driven by cheap capital following the global financial crisis.
The economy is expected to contract 3.4 per cent and 1.2 per cent in the first two quarters of 2019, respectively, before returning to growth of about 2.1 per cent in the third, according to the poll’s median. The first quarter GDP reading is expected to be published on May 31.
The poll also showed that growth is expected to stand at 2.7 per cent in 2020. The International Monetary Fund this week forecast a 2.5 per cent contraction in Turkey this year, and 2.5 per cent growth in 2020.
Forecast in the poll were generally revised down from a similar poll conducted three months ago, displaying a further deterioration in sentiment towards Turkey. — Reuters