Turkey

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The economy ended 2022 relatively strong, propelled by ultra-loose monetary policy. Deeply negative real interest rates – in stark contrast to the large-scale coordinated monetary tightening across much of the rest of the world – have delivered a short-term boost to credit expansion and real economic growth. However, they have also led Turkey to have easily the highest rate of inflation in CESEE, which has meant significant challenges for households and firms. Exports performed well in 2022, supported by a post-COVID tourism boom and a weaker lira. However, the current account deficit has widened and continues to be financed largely by ‘net errors and omissions’, making it difficult to assess the sustainability of the financing gap. We expect the economy to grow by about 3% in 2023, and for fiscal and monetary policy to remain loose at least until the general election scheduled for May 2023. So long as the central bank keeps interest rates deep in negative territory, the exchange rate will depreciate and inflation will stay at eye-watering levels. The election result is currently too close to call; but whoever wins, we expect the post-election period to be characterised by higher interest rates to bring inflation back under control.
        FORECAST*
Main Economic Indicators202020212022202320242025
Population, 1000 persons8338584147....
GDP, real change in %1.911.45.13.03.24.0
GDP per capita (EUR at PPP)1832020340....
Gross industrial production, real change in %2.216.5....
Unemployment rate - LFS, in %, average13.212.011.510.59.59.0
Average gross monthly wages, EUR570556....
Consumer prices, % p.a.12.319.672.337.019.011.0
Fiscal balance in % of GDP-2.9-2.4-4.9-3.0-2.5-2.0
Public debt in % of GDP39.741.8....
Current account in % of GDP-5.0-0.9-6.3-5.0-3.5-3.5
FDI inflow, EUR m681511233....
Gross external debt in % of GDP56.256.7....


Basic data are continuously updated.

* Forecasts are changed beginning of January, April, July and November.
See Press Conferences.

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Monthly Report No. 1/2023

Vasily Astrov, Alexandra Bykova, Rumen Dobrinsky, Selena Duraković, Richard Grieveson, Doris Hanzl-Weiss, Gabor Hunya, Branimir Jovanović, Niko Korpar, Sebastian Leitner, Isilda Mara, Olga Pindyuk, Sandor Richter, Bernd Christoph Ströhm, Maryna Tverdostup, Nina Vujanović, Zuzana Zavarská and Adam Żurawski
wiiw Monthly Report No. 1, January 2023
44 pages including 4 Tables and 16 Figures

Details

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Executive summary

Branimir Jovanović
in: Bracing for the Winter
wiiw Forecast Report No. Autumn 2022, October 2022 , pp. I-VIII
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