EBRD revises up Türkiye’s 2023 GDP growth forecast to 3.5%
Türkiye's Medium-Term Program released in September was received positively by investors, and foreign capital flow signals return of investors, says senior EBRD economist.
The European Bank for Reconstruction and Development (EBRD) has revised up its yearly GDP growth projection for Türkiye to 3.5 percent from its May forecast of 2.5 percent in its latest Regional Economic Prospects report.
The revision for Türkiye reflects strong growth in the first half of the year, driven by pre-election fiscal stimulus, the bank said on Wednesday, while pointing out that there are still external imbalances.
The EBRD expects the Turkish economy to grow by 3 percent in 2024.
After the Turkish government’s new economic measures, foreign capital is flowing into Türkiye, signalling a return of foreign investors and helping rebuild the country’s reserves, regional lead economist Rafik Selim said.
Türkiye was also able to secure investments from Gulf countries to the tune of $50 billion in different sectors, such as space and defence, energy and natural resources, he added.
Medium-Term Program received positively
Selim noted that steps taken by the government since the May elections have been received with cautious optimism by markets.
“We are witnessing a decline in Türkiye’s credit risk premium (CDS) from its historic peak in May 2023. We are also seeing an improvement in investor confidence. Foreigners’ holdings of Turkish equities an d bonds have picked up strongly,” he said.
The CDS score, which was 700 points before the elections, fell below 400 after the government’s measures and messages given in its Medium-Term Program.
“The new measures, such as consecutive hikes in policy interest rates, increases in the value-added and other taxes, and cutting back on interventions to defend the lira are expected to also lead to lowering the current account deficit, which has widened significantly, and rebuilding foreign exchange reserves,” Selim said in an email interview.
The Turkish Central Bank last week raised its policy rate by 500 basis points to 30 percent, meeting market forecasts.
“The Medium-Term Program that was released in September has also been received positively by investors, signaling the authorities’ commitment to price stability, efficient distribution of resources and the sustainability of growth,” he added.