Why did the IMF forecast growth for Turkey?

The International Monetary Fund (IMF) released a report on September 23, which, despite last year's monetary crisis and negative media reports from various Western media, raised Turkey's growth forecasts significantly.

The IMF has changed Turkey's 2019 GDP growth estimate from -2.5{7be40b84a6a43fc4fae13304fce9a2695859798abfc41afd127b9f8b21c5f9c5} to 0.25{7be40b84a6a43fc4fae13304fce9a2695859798abfc41afd127b9f8b21c5f9c5}.[Turkey] In late 2018, depreciation and a sharp recession rebounded on the back of policy stimulus and favorable market conditions. ”

Economists argue for another reason why the country's economic outlook improves.

Gokhan Ovenc, assistant professor of economics at the University of Istanbul, said, “Ankara has sharply cut interest rates to benefit both credit and fund sectors, and the market has rebounded.

Second, there are seasonal reasons. In the summer, there was a serious influx of tourists to Turkey, helping the national economy. ”

Ovenc believes that the IMF and other major international financial institutions did not expect this kind of growth in Turkey because there was no clue that Ankara could cut interest rates significantly.

The sharp rate cut in Turkey's central bank, which has reached 7.5 percentage points since July, has been harshly criticized by some economists and financial institutions, but so far it seems to be helping the national economy.

The IMF report said, "The Lira has recovered and the current account has been significantly adjusted."

The report recorded positive growth in the first half of 2019, fueled by expanded fiscal policies, fast state bank credit offerings, strong contributions from net exports, and more favorable market sentiment, the report continued.

However, the fiscal deficit is increasing and the Ankara warning on the vulnerable nature of economic reform is included, referring to its dependence on foreign finance.

According to Ovenc, Turkey's credit expansion policy, which seems to help economic growth, should be strengthened by other long-term economic measures, such as increased productivity and trade.

“The advantage of Turkey is that the exchange rate has recently stabilized between 5.5 Lira and 6 Lira. [per dollar]”Ovenc said TRT World. He believes that the Turkish currency will continue to exist between these lines unless the global economic crisis occurs unexpectedly.

As a result, both importers and exporters affected by currency fluctuations will have the confidence to strengthen trade by conducting business in Turkey, Ovenc said.

"The actual policy rates, lira stability, favorable base effects and, consequently, low inflation, make CBRT possible. [Central Bank of the Republic of Turkey] IMF report also pointed out.

Source: TRT World