Fitch cuts Turkey economic growth forecast; Erdoğan sees strong rebound
Fitch lowered its economic growth forecast for Turkey for the second time in two months, citing the collapse in the tourism industry.
Turkey’s economy is expected to contract by 3.9 percent this year, Fitch said in a report on Monday, cutting its forecast from a previous negative 3 percent. It also reduced its growth predictions for Russia, Mexico, Brazil, Indonesia, South Africa and the United Kingdom.
Turkish President Recep Tayyip Erdoğan said on Monday that preliminary economic data for June pointed to a “very strong recovery period”. Turkey would become one of the world’s star countries to reshape itself after the pandemic, he said.
The Turkish authorities have flooded the economy with cheap credit from state-run banks as part of measures to stimulate an economic rebound. The central bank has also slashed interest rates to 8.25 percent from 24 percent in less than a year to support the government’s economic growth goals.
Fitch said Turkey’s economy was among those displaying a recovery from a slump in activity - pointing to the surge in credit. But it said its assumptions for growth in emerging markets and elsewhere were based on continuing restrictions on travel, leisure and business activities, and sustained voluntary social distancing.
“The risk of the virus resurging and prompting renewed nationwide lockdowns – or a massive escalation in voluntary social distancing behaviour – is very high,” Fitch said. The downside scenario would be based on a major setback in the global health crisis, resulting in GDP failing to return to pre-virus levels until the middle of the decade, it said.
Turkey is seeking to re-open its tourism industry, which earned a record $34.5 billion in 2019. But European countries are keeping travel warnings on the country in place. Those nations include Germany, which supplied the second most visitors last year. In Russia, which ranked first, cases of the coronavirus remain elevated.
Erdoğan warned earlier this month that Turks should continue to observe social distancing rules to contain COVID-19 after official data showed an uptick in new cases. The government has reintroduced some weekend lockdowns in several regions, including the largest cities of Istanbul and Ankara, in an effort to prevent a second wave of the infection.