Turkey downsizes economic growth outlook as crisis bites
Turkish Finance Minister Berat Albayrak has unveiled a much anticipated plan to rescue Turkey from its economic woes, pledging to adhere to stricter fiscal policy and focus on financial stability.
Turkey expects economic growth to slow sharply in the next three years as the government cuts spending and combats inflation, Finance Minister Berat Albayrak said on Thursday, seeking to shore up the $800 billion economy amid a crisis that crashed the lira and hit banks and corporate balance sheets hard.
Albayrak revealed the government’s revised expectations in a medium-term economic program (MTP) that covers the period until 2021. The presentation had been widely anticipated by rattled investors as a prescription for recovery in yet another test for the neophyte finance minister, who was named to the post by his father-in-law, President Recep Tayyip Erdogan, on July 9.
Since then, the lira has lost more than a quarter of its value as investors dumped Turkish assets, worried about Erdogan’s control over the economy. Now they want to see Turkey implement austerity measures, even as Erdogan continues to push for lower interest rates to keep credit cheap and the economy growing.
For the moment, tighter fiscal policy appears to have won out as Albayrak unveiled the government’s forecasts for the next three years. Gross domestic product is seen increasing 3.8% this year before slowing to 2.3% next year, compared with previous government forecasts of 5.5% for both years, according to Albayrak’s presentation. Slower growth will persist in 2020 and 2021. Last year, the economy expanded by 7.4%, the fastest in the G-20.
