Turkish economic growth forecasts unduly optimistic, analyst says

Estimates for economic growth in Turkey this year are unduly optimistic and prone to downside revisions, said economist Atilla Yeşilada in an analysis for financial news website P.A. Turkey on Tuesday.

The World Bank is forecasting that Turkey’s economy will expand by 4.5 percent this year. Meanwhile, a survey by Reuters is predicting a 4 percent expansion.

“GDP growth requires financing, which is simply not present or forthcoming,” Yeşilada said, citing a sharp slowdown in credit growth and expectation that banks will not grow their loan books in real terms during 2021.

Turkish banks are unable to grant long-term loans for manufacturers to expand capacity and build new factories, Yeşilada said, citing a mismatch with bank deposits, which have an average maturity of three months. Foreign investment in the economy has also been in decline, he said.

Yeşilada said November data for the balance of payments also shows that banks do not believe in an impending investment boom in Turkey that might drive economic growth. In November, the banking industry made net foreign loan repayments of $629 million, while other industries paid back a net $191 million.

“Can this picture change - for the better?  Why should it?” Yeşilada said. “The very reason that compelled banks and firms to reduce their FX short positions remain the same:  the epidemic, erratic decision-making by (President Recep Tayyip) Erdoğan and currency and interest rate volatility.

“Growth will be hard to come by in Turkey in 2021.”