Turkey economy rebounding much faster than expected, ING says

Turkey’s economy is outperforming, rebounding from a currency crisis in 2018 at a much higher pace than anticipated, Dutch bank ING said.

Credit policies, a supportive fiscal stance and strong net exports have all contributed to the turnaround, ING’s chief economist for Turkey Muhammet Mercan said in a report published on Thursday.

Mercan was responding to economic data that showed industrial output surging by 8.6 percent annually in December in a fourth-straight month of advances.

“Recent high-frequency data suggest the recovery will continue this year with ongoing acceleration in lending thanks to the changes in the reserve requirement framework and deep rate cutting cycle since mid-2019,” Mercan said.

Turkey’s economy is recovering from the currency crisis, which had sent it into a painful recession in late 2018 and early last year. The government responded with tax cuts and ordered state-run banks to provide companies and consumers with below-inflation interest rates on loans.

The government targets economic growth of 5 percent this year under a programme announced in September. Some economists fear that the unorthodox steps it is taking may destabilise the economy. The government denies such claims labelling them as scare mongering.

Industrial output also rose 1.9 percent month-on-month in December.

Output has grown every quarter in 2019 – 1.5 percent quarter-on-quarter in the last two quarters, 0.8 percent in the second and 1.8 percent in the first, Mercan said. In 2019, output contracted an annual 0.7 percent, reflecting the impact of the currency shock and the extent of the ensuing economic adjustment, he said.