Turkish economy to rebound 6% in 2021: EBRD

ANKARA

The Turkish economy, expected to shrink in 2021 like many other countries due to the coronavirus, will bounce back 6% in 2021, the European Bank for Reconstruction and Development (EBRD) said on May 13. 

"Turkey is likely to see a contraction of 3.5% in 2020 because of the economic impact of the coronavirus pandemic," the bank stressed in a press release.

While weaker tourism revenues and export demand are among the main problems, lower oil prices by providing dependence on imported energy and decreasing inflation may relieve the country's economy, it said.

It added: “With the non-performing loan ratio standing at a 10-year high of 5.3%, the weakness of the lira and contractions in 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."

Countries in the bank's region are expected to contract 3.5% this year on average and rebound 4.8% next year, it also noted.

Beata Javorcik, a chief economist in the bank, said: "This is not the time to engage in economic nationalism and protectionism, but a time to shape a better future through an international commitment to free trade, climate change mitigation and economic cooperation."  Turkey's economy expanded by 2.6% in 2018 and 0.9% in 2019.

Asked if Turkey could benefit from low oil prices, Roger Kelly, the bank’s lead regional economist covering Turkey, Romania, and Bulgaria, told Anadolu Agency: “This is certainly the case for Turkey. It is one of the number
of countries that benefit from when oil prices fall.

One of the perpetual concerns we have for the size of Turkey’s current account deficit. One of the key contributors to this deficit is energy imports.”

He added: “The cost of energy is going down. We expect a $10 oil price drop to trim around $3.5-4 billion [from the current accounts deficit]. On top of the current account impact, there is a disinflationary impact, a $10 drop in oil prices would translate just under 1 percentage point inflation. This would also provide some sort of support for Turkey.”

He also said global supply disruptions might change the manufacturing landscape in the future, bringing supply chains closer to home.

“Interruptions we have seen in global supply chains, driven because of the response of the pandemic, certainly have given a lot of producers around the world some thoughts,” he said.