Middle-East: The Turkish economy will grow by 5.8% this year and return to a lower trend from 2022, the International Monetary Fund said on Friday, calling for steps to address high inflation and low reserves.
“Due to a large positive transfer of the sharp recovery of activity in the second half of 2020, growth should be around 5.75% this year,” the Fund said in a statement following its consultation with Article IV concluded in 2021.
“With high external financing needs, large domestic currency deposits and low reserve buffers, the economy remains vulnerable to shocks and changes in sentiment abroad.”
The rapid economic recovery following the outbreak of the coronavirus with state-bank-led credit growth and liquidity support was exceptional, the Fund said, adding that policies, however, fueled inflation, dollarization and external imbalances.
The Fund also emphasized the importance of adopting policies to reduce vulnerabilities and to combat a fixed monetary policy system to combat inflation.
“Directors also emphasized the importance of strengthening the independence of the central bank, rebuilding high-quality reserves, further simplifying the operational framework and improving policy communication,” he said.
The lira has fallen by about 11% so far this year, in addition to the double-digit decline over the past three years, while inflation is around 17%.