A World Bank report released late on Wednesday projected the Turkish economy would grow 3% in 2020 and 4% in 2021, rebounding from earlier financial turmoil at a faster pace than expected as domestic demand improves.
The bank revised its previous forecast that Turkey would contract 1% in June 2019 to 0% in its latest Global Economic Prospects report.
“In Turkey, activity is rebounding from earlier financial turmoil at a faster-than-expected pace as domestic demand improves; however, the pickup remains fragile amid subdued confidence and investment.” the report said.
Global growth is projected to reach 2.5% in 2020, slightly faster than the post-crisis low registered last year, it noted, adding that while growth could further strengthen if risks dampened with an easing in global trade tensions and sustained reduction in uncertainty.
In terms of emerging markets and developing economies (EMDEs), the report forecasted that EMDE growth would accelerate this year to 4.1%.
“This rebound is not broad-based; instead, it assumes improved performance of a small group of large economies, some of which are emerging from a period of substantial weakness,” the report said.
It highlighted that a third of EMDEs were projected to decelerate due to weaker-than-expected exports and investment.
“Instead, it is largely predicated on a rebound in a small group of large EMDEs, most of which are emerging from deep recessions or sharp slowdowns caused by earlier financial pressures,” it noted.
About 90% of this pickup in the bank’s EMDE growth forecast was accounted for by only eight countries representing just a third of the subset’s GDP, being Argentina, Brazil, India, Mexico, Russia, Saudi Arabia and Turkey, it said.
“With growth in emerging and developing economies likely to remain slow, policymakers should seize the opportunity to undertake structural reforms that boost broad-based growth, which is essential to poverty reduction,” said Ceyla Pazarbasioglu, World Bank Group Vice President for Equitable Growth, Finance and Institutions.
She emphasized that steps to improve the business climate, rule of law, debt management and productivity could help achieve sustained growth.
Downside risks to global economy
Pazarbasioglu also warned of downside risks to the global outlook.
These risks include the re-escalation of trade tensions and trade policy uncertainty, a sharper-than-expected downturn in major economies and financial turmoil in EMDEs.
Projections for Middle East and North Africa
The forecast suggested that regional growth was projected to pick up to 2.4% in 2020 and about 2.8% in 2021-2022, as infrastructure investment and business climate reforms proceeded.
Pointing to risks that it said are tilted firmly to the downside including geopolitical tensions, escalation of armed conflicts and slower-than-expected reforms, the bank said these effects could slow long-term productivity prospects.
Iran in spotlight
Last year, growth in the Middle East and North Africa region slowed to an estimated 0.1% in 2019, down from 0.8% the previous year. According to the bank, this reflects recent developments in Iran’s economy.
It said the sharp growth contraction in Iran, following the tightening of U.S. sanctions, geopolitical tensions in the Strait of Hormuz and diplomatic setbacks had had economic consequences.
Weakened global growth also weighed on demand for oil and other exports, further hindering activity in the region in general, added the report, which was written prior to rising tensions between the U.S. and Iran during the first week of January 2020.