REGIONAL REPORT
Turkey ’ s response to the influx of approximately 3.6 million Syrian refugees has been exemplary and provides a model to other countries hosting refugees
disadvantaged regions . Poverty incidence more than halved over 2002 – 15 , and extreme poverty fell even faster . During this time , Turkey urbanised dramatically , maintained strong macroeconomic and fiscal policy frameworks , opened to foreign trade and finance , harmonised many laws and regulations with European Union ( EU ) standards , and greatly expanded access to public services . It also recovered well from the global crisis of 2008 / 09 ,” said the World Bank .
“ Turkey ’ s response to the influx of approximately 3.6- million Syrian refugees has been exemplary and provides a model to other countries hosting refugees . However , there has been a slow-down in reforms in several areas in recent years that , together with economic vulnerabilities , risks
MAIN COUNTRIES FOR TURKISH MACHINERY EXPORTS ( 2019 )
Source : TurkStat-Turkish Statistical Institute .
reversing some of the progress made to date . The overall macroeconomic picture is more vulnerable and uncertain , given rising inflation and unemployment , contracting investment , elevated corporate and financial sector vulnerabilities , and patchy implementation of corrective policy actions and reforms ,” said the World Bank .
It also highlighted significant external headwinds due to ongoing geopolitical tensions in the subregion .
“ The impact of the COVID-19 crisis is expected to have a severely negative effect in Turkey , further weakening economic and social gains ,” it added .
Market forecasts
“ The Istanbul Chamber of Industry Turkey Manufacturing PMI increased to 54.4 in January 2021 from 50.8 in December 2020 , pointing to the strongest growth in manufacturing activity since last July , as output , new orders and exports all returned to growth ,” commented analyst , Markit Economics . “ The rate of job creation quickened to the fastest since December 2017 , amid reducing COVID-19 case numbers .
Sheet metal production at Ford car factory at Izmit , Turkey ( Shutterstock . com ).
Automotive manufacturing in Turkey .
On the price front , input prices inflation eased to a sixmonth low , due to a rise in prices of raw materials , amid relatively stable exchange rates . Meanwhile , output charge inflation slowed .”
According to the International Monetary Fund ( IMF ), the Turkish economy is expected to see continued positive growth in 2021 . With the roll-out of a vaccine and recovery of trading partner growth , and mainly reflecting large positive growth carryover from 2020 , Turkish GDP is expected to expand by about six per cent in 2021 . “ From 2022 onwards , growth is projected to settle back to trend ( about 3½ per cent ). Inflation is expected to fall modestly by the end of 2021 and remain well above target . The current account deficit is expected to fall to 3½ per cent of GDP , in large part reflecting lower gold imports and a modest recovery of tourism . Employment is expected to continue to recover slowly as the pandemic subsides ,” added the IMF .
However , it pointed out , low buffers mean that vulnerabilities will remain elevated . Low foreign exchange reserves , coupled with high external financing needs and high domestic foreign exchange deposits , leave the economy vulnerable to shocks and changes in sentiment , both at home and overseas . Under the current set of policies , buffers will be rebuilt gradually .
“ A further rebalancing of policies that is sustained over time would underpin more durable medium-term growth . Building on the welcome policy pivot , demand management policies need to continue to be carefully calibrated in the coming months . Maintaining a firm monetary stance , accompanied by additional pandemic-focused fiscal support that is temporary and targeted , would achieve a broadly neutral , but better calibrated , policy stance . Such an adjustment would help rebuild credibility and buffers , while also responding to the human and economic needs arising from the pandemic ,” said the IMF .
The IMF also advocated a firm monetary policy stance , with further measured monetary policy tightening needed ‘ should inflation expectations fail to stabilise ’.
“ Furthermore , any premature easing should be avoided , in line with recent CBRT forward guidance , to better anchor inflation expectations , sustain capital inflows and address dollarisation . These actions would pave the way for a stronger lira and higher reserves , especially when
innovation centres will enable OIZ firms to maintain or deepen their participation in global value chains post-COVID by increasing the competitiveness of OIZs around the country
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