Turkey Economic Monitor February 2022 : Sailing Against the Tide
Turkey’s economic performance has been a tale of two economies, overall high growth, matched by a deterioration in macro-financial conditions. Good progress in vaccination rollouts allowed Turkey to reopen gradually in 2021 despite a continued rise...
| Format: | Working Paper |
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| Language: | English |
| Published: |
Washington, DC: World Bank
2022
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/134371644416750262/Turkey-Economic-Monitor-Sailing-Against-the-Tide http://hdl.handle.net/10986/37035 |
| Summary: | Turkey’s economic performance has
been a tale of two economies, overall high growth, matched
by a deterioration in macro-financial conditions. Good
progress in vaccination rollouts allowed Turkey to reopen
gradually in 2021 despite a continued rise in Coronavirus
(COVID-19) cases. Real economic activity remained strong,
driven by strong broad-based export growth and domestic
demand. Exports of goods reached record high levels in 2021
supported by buoyant external demand, improved price
competitiveness and demand shifts to Turkey due to rising
shipping costs. Turkey’s GDP grew by 22 percent year-on-year
in 2021Q2–the second highest among G-20 countries–and 7.4
percent in 2021Q3. Strong goods and services export
performance helped current account deficit to narrow
significantly. Robust economic activity led to strong
revenue growth and supported fiscal balances. The labor
market saw a good recovery in 2021 and employment levels
surpassed pre-pandemic levels, supported by buoyant economic
activity. The regional inequalities of the COVID-19 shock
manifested in larger impacts for women from Eastern regions,
widening pre-existing gender gaps. The authorities began to
cut interest rates in September, by 500 basis points by the
end of 2021, despite rising inflation and inflation
expectations. This has exacerbated macro-financial
conditions and impacted investor confidence - causing
financial market turbulence, large deprecation of the Lira,
higher inflation, and increased dollarization. The Lira has
been the most depreciating currency among emerging market
economies this year. The large depreciation of the Lira
coupled with rising international prices caused inflation to
increase to its highest rate since the August 2018 shock. |
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