REGIONAL REPORT
Image: Shutterstock. com.
interventions that contribute to job creation,” it continued.
“ Turkey continues to address the effects of the earthquakes that hit the country in 2023. They caused more than 50,000 casualties, injured 107,000 people, damaged or destroyed 1.9 million housing units and displaced 3.3 million people, of whom two million needed shelters. The assessments estimated the recovery and reconstruction needs at around US $ 81.5 billion. Risks also remain high, with about 70 % of the country’ s population living in first- and second-degree seismic zones,” added the World Bank.
Following the May 2023 Presidential elections, a World Bank economic team launched a comprehensive policy set to address past macroeconomic imbalances, especially high inflation. Since then, Turkey has been moving to normalise its macroeconomic strategies.
“ The country experienced robust economic expansion of 4.5 % in 2023 that moderated slightly to 3.2 % in 2024. Growth is currently expected to remain broadly stable at 3.1 % in 2025. Longstanding macro and structural challenges that undermine potential growth—
Ankara, Turkey. including high inflation, low productivity growth and weakening foreign direct investment— would require robust fiscal measures and ambitious structural reforms to help accelerate sustainable economic growth,” outlined the World Bank.
The IMF view
“ The policy turnaround has reduced economic imbalances and revived confidence. Headline inflation has fallen as tighter financial conditions are weighing on domestic demand. Market sentiment has sharply improved, with domestic and foreign investors shifting into liradenominated assets while lower commodity prices, buoyant exports and reduced gold imports have strengthened the current account, supporting a large improvement in both the gross and net reserves position. The financial and corporate sectors appear to have weathered the policy tightening and financial liberalisation so far. Credit default swaps( CDS) spreads are now at about half their mid-2023 levels,” it continued.
“ Under the authorities’ gradual policy adjustment, inflation is expected to further decline. Contractionary ex ante real policy rates, moderating wage growth and more contractionary fiscal policy in 2025 are expected to reduce inflation to 43 per cent this year and 24 per cent in end-2025. After a strong first quarter, growth has weakened and is expected to fall to 3 per cent in 2024 and 2.7 per cent in 2025, recovering toward 4 per cent in the medium term. Disinflation and improved confidence will support a narrowing of the current account deficit to about 2 per cent of GDP and reserves to around 100 per cent of the IMF’ s adequacy metric,” it added.
Risks around the baseline were significant, said the IMF. They included stronger-than-expected wage
Image: The Power Couple, Unsplash.
On 27 September 2024, the Executive Board of the International Monetary Fund( IMF) concluded its Article IV consultation with Turkey.
“ A decisive shift in economic policies over the past year has tightened Turkey’ s overall policy stance. The Central Bank of the Republic of Türkiye( CBRT) has brought the ex ante real policy rate into positive territory while reducing regulatory complexity. Tax and expenditure measures underpin efforts to restore fiscal prudence and the commitment to stronger incomes policies has strengthened credibility,” said the IMF in October 2024.
Factory operation. Image: Cemrecan Yurtman( Unsplash).
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