Turkey economy may contract 5 percent this year, IMF says

Turkey’s economy may contract 5 percent this year, the International Monetary Fund said in its semi-annual World Economic Outlook.

The decline in the country’s economic output will be accompanied by an increase in unemployment, the IMF said on Tuesday, predicting a jobless rate of 17.2 percent by the end of 2020.

Turkey is working to soften the economic impact of the spread of the coronavirus – infections in the country have risen to 65,111, official data showed, with an additional 4,062 cases reported on Tuesday. The government has announced a 100-billion lira ($15 billion) package of measures to help businesses and workers deal with the outbreak, which began in mid-March.

The IMF’s prediction of an economic contraction this year compares with Turkey’s goal of 5 percent growth, a figure the government has yet to officially revise. Unemployment in the country of 82 million stood at 13.8 percent in the three months to February.

Consumer price inflation may end the year at 12 percent, the fund said. Inflation In the country stood at an annual 11.9 percent in March. The government's goal is 8.5 percent.

Inflation in the country is being pressured by a decline in the value of the Turkish lira. On Wednesday morning, the lira fell by 0.5 percent to 6.85 per dollar, extending its lowest levels since a currency crisis in August 2018. The record low set that month stands at 7.2 percent.

The Turkish government's ability to stimulate the economy is limited after it spent tens of billions of dollars since the currency crisis to help boost growth. The central  bank has also slashed interest rates to single digits and spent foreign currency reserves in the lira's defence.

The IMF said the Turkish economy may grow by 5 percent in 2021, but inflation would probably remain sticky at about 12 percent. Unemployment could amount to 15.6 percent, it said. 

The country's current account could post a surplus of 0.4 percent of GDP this year, before reverting to a deficit of 0.2 percent in 2021, the IMF said.