Fitch raises Türkiye’s annual growth forecast

American credit rating agency Fitch has increased its yearly growth prediction for Türkiye in 2023 from 2.5 percent to a high 4.3 percent, in response to Türkiye’s strong 3.8 percent economic growth in the second quarter of this year.

The most recent Global Economic Outlook Report for September 2023, published by Fitch Ratings, provides insight into the state of the world economy. According to the analysis, this year's rate of global economic growth is likely to be slightly higher than expected.

However, worries continue about the growing difficulties in China's real estate industry, which are threatening hopes for a global economic expansion. The prognosis for demand is also under strain due to the tightening of monetary policy in the US and Europe.

Fitch's revised growth projection for Türkiye demonstrates the country’s economic strength and resilience in the face of a strained global economic forecast.

Türkiye’s growth economy

Türkiye stands as the second fastest growing economy in the 36-member Organisation for Economic Co-operation and Development (OECD) group of countries, after the announcement of the second quarter growth figures.

The report stated that the strong increase in consumption, investment and public spending helped the economy grow by 3.5 percent on a quarterly basis, well above Fitch's previous forecast of 0.6 percent.

The Turkish economy is expected to grow by 3 percent in 2024 and 3.4 percent in 2025, the report added.

The report also noted that the economy is expected to maintain its momentum in the second half of this year on the back of retail sales and an increase in domestic credit growth, while government spending on post-earthquake reconstruction projects is expected to continue to support the economy.

China's growth forecasts downgraded

In the report it was stated that China’s housing market accounts for 12 percent of the country's Gross Domestic Product (GDP), the report claimed, emphasising that it has a strong multiplier effect on the wider economy.

Fitch's report, which stated that policy loosening in China has so far been “insufficient,” noted that export demand has fallen. The report also said that the economic growth forecast for the Chinese economy was reduced from 5.6 percent to 4.8 percent for 2023, and from 4.8 percent to 4.6 percent for 2024.

Continuing spectre of US recession

The report pointed out that the US continued to experience rapid consumption growth this year, despite a tightening of policy by the US Federal Reserve (Fed), and noted that this was due to a rapid rise in employment and wages. It noted that labour demand has slowed down in recent months and wage inflation will fall further, as the labour market continues to cool.

In addition to the possibility of a slowdown in labour income, the report stated that the tightening in credit conditions became evident as credit momentum had turned negative, while a decline in profit growth pointed to weakening investment expectations.

"We are still expecting a mild recession, but now estimate that this will occur in the first half of 2024," the report said.

The report, which raised the growth forecast of the US economy for this year from 1.2 percent to 2 percent, also reduced the growth expectation of the country's economy for next year from 0.5 percent to 0.3 percent.

Eurozone growth forecasts were also revised downwards

Regarding Europe, the report stated that the recovery in the Eurozone, which had stalled after the energy shock, now faces new external challenges from the slowdown in world trade and China, while the tightening of the European Central Bank (ECB) has put pressure on credit growth.

Accordingly, Fitch has lowered the growth expectation of the Eurozone economy for 2023 from 0.8 percent to 0.6 percent, and for next year from 1.4 percent to 1.1 percent.