The European Bank for Reconstruction and Development (EBRD) said on Wednesday it expects Turkey’s GDP to contract by 3.5 percent in 2020 due to the coronavirus pandemic before recovering to 6 percent growth next year, according to the SeeNews website.
“While leading indicators suggest the recovery was sustained in the first months of 2020, domestic and external demand will be hard hit by the pandemic,” the EBRD said in its May 2020 Regional Economic Prospects report, adding that its growth forecast depends heavily on the duration and extent of social distancing measures.
In the previous edition of the report issued in November 2019 the EBRD predicted that Turkey’s GDP would grow by 2.5 percent in 2020.
Turkey is seeing a significant decline in tourism revenues and weaker export demand, but the lower oil price will provide limited support and help offset the inflationary impact of the weakening lira, the EBRD said in the latest edition of the report.
It also said that with the non-performing loan ratio of the Turkish banking system standing at a 10-year high of 5.3 percent, the weakness of the lira and contractions in the tourism, retail and export sectors are likely to put further stress on the already strained asset quality of banks. Meanwhile, government efforts to spur bank lending may lead to further asset quality deterioration, the EBRD said.