Reuters poll expects 1.5 pct contraction by yearend for Turkish economy

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This picture is taken on April 10, 2018 in Istanbul shows a screen displaying foreign exchange rates against Turkish liras as a man looks to the rates at Istiklal avenue. / AFP PHOTO / OZAN KOSE

Turkey’s economy is expected to shrink 1.5 percent by yearend for the first time in a decade and to see only modest growth in the following two years, a Reuters poll of more than 40 economists indicates.

The government’s own sharply lowered forecast for this year envisages an expansion of 2.3 percent.

There was a wide range of estimates in the July 4-16 Reuters poll, from growth of 1 percent to a contraction of 5 percent. The poll sees growth of 2.4 percent in 2020 and 3.4 percent in 2021.

In the second and third quarters of 2019 the economy is forecast to contract by 2.5 percent and 1.1 percent, respectively, before returning to growth of just 1.0 percent in the final three months of the year, the poll medians showed.

Second quarter GDP growth is due to be announced on Sept. 2.

Turkey’s economy last contracted on an annual basis in 2009, by 4.7 percent. From 2010 to 2017, its compound growth rate was 6.6 percent thanks to a construction boom driven by cheap capital following the global financial crisis.

But hit by a currency crisis that triggered a nearly 30 percent lira slide against the dollar, the Turkish economy contracted 2.6 percent in the first three months of the year after shrinking 3.0 percent in the fourth quarter of last year.

That lira slide pushed inflation to a 15-year high, severely limited companies’ ability to service foreign debt and multiplied bad loans in the banking sector.

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