Sep 19 2019

Turkey economy seen contracting less than previously forecast, OECD says

Turkey’s economy is expected to contract by 0.3 percent this year, the Organisation for Economic Cooperation and Development (OECD) said in its latest global economic outlook.

The OECD had previously forecast a 2.6 percent contraction for Turkey in a similar report in May. It left its prediction for next year unchanged at growth of 1.6 percent.

“GDP was stronger than expected in the first half of 2019, helped by temporary fiscal and quasi-fiscal spending, and strong tourism exports,” the OECD said. “However, investment continues to contract and credit growth is still weak.”

Turkey’s economy is recovering from a currency crisis last year that caused a recession in the second half of 2018. The country posted positive quarter-on-quarter economic growth in the first half of this year, but annual growth remains negative.

The OECD said that monetary policy easing would likely help economic activity in Turkey pick up modestly next year, provided local and global economic confidence is maintained. But it warned the Turkish authorities that stimulus had its limits.

“Extraordinary fiscal and quasi-fiscal support and large cuts in policy interest rates have helped to temporarily cushion activity, but continued use of such measures may risk undermining financial and price stability,” the OECD said.