Turkey’s economy to grow 5.8% in 2021 -IMF

The logo of the International Monetary Fund (IMF) can be seen outside the headquarters in Washington, USA, 4 September 2018. REUTERS / Yuri Gripas

The Turkish economy will grow 5.8% this year and return to a lower trend from 2022, the International Monetary Fund said on Friday, calling for steps to combat high inflation and low reserves.

“Growth should mainly reflect a large positive carryover from the strong recovery in activity in the second half of 2020, reaching around 5.75% this year,” the fund said in a statement concluding its Article IV 2021 consultation.

“With high external funding needs, sizeable domestic foreign currency deposits and low reserve buffers, the economy remains vulnerable to shocks and sentiment swings at home and abroad.”

The rapid economic recovery from the coronavirus outbreak with government loan growth and liquidity support is exceptional, the fund said, adding that policies have fueled inflation, dollarization and external imbalances, however.

The Fund also emphasized the importance of taking action to reduce vulnerabilities and commit to a firm monetary policy stance to fight inflation.

“Directors also emphasized the importance of strengthening central bank independence, rebuilding high-quality reserves, further simplifying the operational framework and improving political communication,” it said.

The lira has fallen around 11% so far this year, on top of double-digit declines over the past three years, while inflation has been around 17%.

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