The European Bank for Reconstruction and Development (EBRD) has revised its growth forecast for the Turkish economy from a previous 2 percent in May to 4.5 percent.
The bank kept its GDP growth estimate for 2023 unchanged at 3 percent.
GDP growth in Turkiye is expected at 4.5 percent in 2022, supported by government spending and better-than-expected net exports, reflecting in part increased exports to Russia, the bank said in its latest Regional Economic Prospects report, released on Sept. 28.
Despite the challenges, economic activity has remained relatively robust and the anticipated negative impact of Russia’s war on Ukraine on tourism has not materialized, it said.
“Growth is forecast to moderate slightly to 3.5 percent in 2023, driven by rising household and government spending ahead of the planned elections.”
The development bank, however, warned that there are significant downside risks to the forecast, including an escalation of geopolitical tensions and spillovers from aggressive policy tightening in developed economies.
Turkiye’s GDP growth accelerated from 7.5 percent in January-March to 7.6 percent in the second quarter of 2022.
“On the positive side, banks remain well capitalized, with a headline non-performing loan ratio below 3 percent, while public finances remain one of the anchors of the economy, with the public debt to GDP ratio standing at a relatively modest 38 percent,” it also said.
Rocketing inflation and dwindling gas supplies fuelled by Russia’s invasion of Ukraine will hammer growth in the ex-Soviet bloc next year, the development bank forecast.
It cut its 2023 growth guidance, with Ukraine facing a much weaker rebound than expected.
The bank’s investment zone is set for growth of 3 percent next year.
But the EBRD had previously forecast a stronger expansion of 4.7 percent for its region, which includes nations ranging from Albania to Poland and Morocco.
Support for women entrepreneurs
The EBRD separately announced that it is providing a $50 million syndicated loan to Akbank, a key lender in Turkiye, to improve the ability of the country’s banking sector to finance women-led businesses.
“The loan is a follow up to the EBRD’s TurWiB II initiative with Akbank and aims to build on the success of the Women in Business credit line provided to the bank back in 2021,”the bank said.
The EBRD’s expanded flagship Women in Business program in the country provides a total of 600 million euros for Turkish banks to on-lend to women-led SMEs to strengthen their role in the Turkish economy and promote inclusive sustainable growth.
To date, the EBRD has invested more than 16.5 billion euros in the country through 378 projects, with the overwhelming majority of those investments in the private sector.