Global credit rating agency Moody’s has downgraded its expectations for Turkish gross domestic product (GDP) growth to 2.5 percent this year and 2.0 percent in 2019, from forecasts of 4 percent and 3.5 percent, respectively, the Financial Times reported on Wednesday.
Turkey enjoyed GDP growth of 7.4 percent in 2017.
“President [Recep Tayyip] Erdogan’s recent statements about gaining control over monetary policy after the presidential and parliamentary elections on 24 June further damaged the credibility of the Turkish central bank’s inflation-targeting framework. The statements also weakened the central bank’s independence, another blow to the rule of law,” Moody’s stated.
Turkey’s Deputy Prime Minister Mehmet Şimşek visited London on Tuesday to meet with global investors, aiming to soften Erdoğan’s remarks. Şimşek promised structural reforms and a rebalancing of the economy while offering assurances of the central bank’s independence.
Moody’s also warned that “[a] worsening of internal and external imbalances, along with a reliance on short-term funding, has increased susceptibility to rising global interest rates and currency depreciation. Foreign currency exposure of the banking sector as well as corporate sectors present additional financial stability risks.”
The Organization for Economic Co-operation and Development (OECD) also on Wednesday slightly downgraded its forecast for Turkey’s GDP growth to 5.1 percent this year and 5.0 percent in 2019, whereas the expectations in a March 2018 report were 5.3 percent this year and 5.1 percent in 2019.