Ankara, Turkey – Turkey should see post-virus turn to draw investment. OECD economist says country recovery from COVID-19 to be gradual, risks remain for growth.

Turkey should see the post-pandemic period as an opportunity to encourage foreign and domestic investment through stronger public governance, said an official from the Organization for Economic Cooperation and Development (OECD).

“Turkey is looking at a gradual recovery from the COVID-19 crisis and risks persist for growth and well-being,” Alvaro Pereira, OECD director of economic country studies, said during a press conference Thursday on the latest survey of the organization over the Turkish economy.

He asserted that the country should focus on restoring macroeconomic stability. The economic activity in Turkey declined sharply at the beginning of the pandemic, Pereira said, adding the government concentrated on credit expansion through state-owned banks during this period.

The OECD welcomed the Turkish Central Bank’s recent tightening monetary policy, the official said and called it very important in terms of macro-economic policies.

Since November 2020, Turkey’s risk premium in international markets saw a significant fall and this will reduce the financing costs of both the government and companies, he argued.

Pereira also advised the government to use market and labor reforms to empower businesses to grow and create quality jobs.

Survey

The OECD on Thursday upgraded Turkey’s growth forecast for 2020.

In its latest economic survey of Turkey, the organization found that “the Turkish economy’s recovery from the first wave of the pandemic was strong but faced headwinds.”

It said the country’s growth rate is estimated to have declined by 0.2% in 2020 instead of 1.3% as previously expected.

It also projected the Turkish economy will grow by 2.6% and 3.5% in 2021 and 2022 respectively.

Once recovery is underway and investor confidence restored, the OECD survey predicted that “a combination of market, institutional and education reforms could lift GDP per capita by 1% per year over the coming years.”

The OECD’s Economic Outlook Report published on December 1, 2020 predicted the growth will be 2.9% in 2021 and 3.2% in 2022.

The global body also said it estimated the average inflation rate in Turkey to hit 12% and %10 in 2021 and 2022 respectively.

Turkish Central Bank announces year-end inflation and dollar outlook

The central bank announced its end-2021 dollar forecast at $ 8.09 and its inflation forecast at 11.15 percent.

The Central Bank of the Republic of Turkey has published the “January 2021 Expectations Survey”, which it conducted with 63 participants consisting of representatives of the real sector, financial sector and professionals. The survey noted the high dollar forecast.

Inflation expectations

The expectation of consumer inflation (CPI) at the end of the current year was 11.15 percent during this survey period. The CPI expectation after 12 months was 10.84 percent in the previous survey period, while it was 10.53 percent in this survey period. After 24 months, the CPI expectation was 9.24 percent and 9.14 percent, respectively, during the same survey periods.

Dollar expectations

The current year-end dollar expectation was announced as TL 8.09. The expectation of the exchange rate after 12 months was TL 8.37 in the previous survey period and TL 8.16 in this survey period.

Growth prospects

GDP growth forecast for 2021 was revised to 3.9 percent in this survey period, compared to 3.8 percent in the previous survey period. GDP growth forecast for 2022 was 4.3 percent during this survey period.