The European Bank for Reconstruction and Development (EBRD) has revised its 2023 GDP growth forecast for Turkey, according to the Regional Economic Prospects report published today. The bank now expects Turkey's economy to expand by 3.5% in 2023, up from a previous forecast in May of 2.5%. This upward revision reflects strong growth in the first half of the year, spurred by pre-election fiscal stimulus. However, growth is expected to decelerate in the second half of the year.
Despite the anticipated growth, the report underscores persistent external imbalances in Turkey's economy. Short-term external debt exceeds $200 billion, and the current account deficit stands at $60 billion. While foreign exchange reserves are increasing, they remain modest.
The EBRD also projects a 3% GDP growth for Turkey in 2024. The bank notes that a return to orthodox economic policies is a positive signal, and local elections in March 2024 will be significant as they approach.
In the first half of 2023, Turkey's GDP growth slowed from 5.6% in 2022 to 3.9% year on year. Inflation declined but remains elevated and is expected to rise to 60% by the end of 2023.
The EBRD has invested more than €18 billion in various sectors of the Turkish economy, primarily in the private sector.
The EBRD also updated its economic growth forecasts for Georgia in 2023 and 2024. The bank now predicts a probable growth rate of 6% for Georgia's economy in 2023, up from an initial forecast of a 5% expansion made in May. However, the growth outlook for 2024 has been scaled back to 4.5% from the previous estimate of 5.3%, attributed to a higher base effect. This remains slightly below the Georgian government's expectation of a 5.2% economic growth rate by 2024.
The EBRD also released growth forecasts for other countries in its region, including a 1% increase for Ukraine, 1.5% increase for Azerbaijan and the Russian Federation, 6.5% growth for Armenia, and 5% growth for Kazakhstan.
Collectively, the EBRD anticipates a 2.4% growth in the economies of the countries in its region, marking a 0.2 percentage point improvement from the previous forecast.
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