Policy normalization helps restore stability in Türkiye: World Bank

ISTANBUL

The normalization of monetary and fiscal policies in Türkiye is helping to restore macroeconomic stability as inflation pressures gradually ease, domestic demand cools and external vulnerabilities lessen, the World Bank has said in a report.

Growth is set to slow to 3.2 percent in 2024, from 5.1 percent in 2023, as the economy rebalances from the consumption-led expansion, according to the bank’s Europe and Central Asia Economic Update.

The bank noted that all the major credit rating agencies have upgraded Türkiye’s credit rating because of the ongoing policy normalization, low public debt and narrowing external imbalances.

The bank downgraded the Turkish economic growth by 1 percentage point, to 2.6 percent, the slowest pace since 2020.

“This reflects weaker consumption as monetary policy remains tight and fiscal policy becomes less supportive,” it said.

The bank expects the Turkish economy to expand by 3.2 percent this year and 3.8 percent in 2026.

Economic growth in the developing economies of the Europe and Central Asia region is stabilizing after a series of crises but at levels well below the early-2000s, the report also said.

Regional growth is expected to moderate to 3.3 percent this year from 3.5 percent in 2023, slowing further to 2.6 percent in 2025, the bank forecast.

“This is significantly weaker than the 5.1 percent average growth of 2000-09 and below what is needed for the region’s middle-income countries to achieve their aspiration of attaining high-income status within a generation or two,” it said.