Mar 14 2019

Fitch cuts forecast for Turkey’s potential economic growth

Turkey’s potential economic growth forecast was cut to an annual 4.3 percent by Fitch Ratings, which cited a sharp external adjustment following last year’s currency crisis.

Fitch reduced its estimate from a previous 4.8 percent, according to a report published on its website on Wednesday

A collapse in Turkey’s investment to GDP ratio would result in significantly lower growth in capital stock, and hence labour productivity, than previously projected, Fitch said.

Turkey’s economy has entered a technical recession, defined as two-straight quarters of quarterly economic contraction, after the lira slumped to a record low against the dollar last August. The currency’s slide has resulted in a surge in interest rates and inflation, curbing spending power and making new investment less likely.

Fitch also reduced a prediction for Brazil's potential growth rate to 1.7 percent from 1.8 percent and Mexico’s forecast to 2.5 percent from 2.8 percent. India’s potential growth was revised up to 7 percent, the highest among major emerging markets, from 6.7 percent, Fitch said. Growth estimates for South African and Indonesia were revised down slightly.