Turkey's economy to shrink 3.4 percent, confounding official forecast – poll

Turkey’s economy is expected to contract by 3.4 percent this year after the COVID-19 pandemic persisted and the lira fell to record lows against the dollar, according to a Reuters poll of 48 economists.

The economic outlook however improved from the median estimate of a 4.2 percent contraction in a previous survey, Reuters said on Wednesday.

The Turkish economy is expected to grow by 0.3 percent this year, Treasury and Finance Minister Berat Albayrak said last month citing forecasts in a new three-year economic programme. The government’s worst-case scenario was for a decline in output of 1.5 percent, he said.

The economy will shrink by an annual 2.6 percent and 2.3 percent in the third and fourth quarters of the year, respectively, after contracting by 9.9 percent in the three months to June, Reuters said.

Economists forecast that Turkey’s output will grow by 4.1 percent next year, well short of the government’s estimate of 5.8 percent, Reuters said.

The economic decline may be worse than expected should there be further impairment of corporate balance sheets and due to concerns over the credibility of economic policy, said Berna Beyazıtoğlu of  Credit Suisse, according to Reuters.

Turkey’s economy last contracted on an annual basis in 2009, when output shrunk by 4.7 percent.