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World Bank raises Turkey's 2021 economic growth f'cast to 8.5%

World Bank raises Turkey's 2021 economic growth f'cast to 8.5% Photo: Pixabay

ANKARA (Turkey), October 8 (SeeNews) - Turkey's real gross domestic product (GDP) is expected to grow by 8.5% in 2021, the World Bank said, revising upwards its June forecast for 5% economic growth.

The Turkish economy will expand 3% next year and 4% in 2023, the World Bank said in the fall 2021 edition of its Europe and Central Asia Economic Update report published earlier this week.

These baseline projections assume no further COVID-19 restrictions in Turkey or its major export markets or excessive flareups in macro financial conditions, the lender noted.

According to the World Bank, Turkey's economic growth momentum is expected to wane in the second half of 2021.

Turkey’s economy grew by 21.7% in the second quarter of this year, marking the second-highest among G-20 countries. Good progress in expanding vaccination coverage allowed pandemic-related restrictions to be relaxed in May, supporting a recovery in domestic demand, the World Bank noted in its report.

The bank said inflation is forecast to stay high but gradually decline from 17.7% in 2021 to 15% next year and and 13% in 2023.

In August, Turkey's consumer price inflation reached 19.3% year-on-year, as food prices soared by 29%. Despite this, the country's central bank reduced the policy rate to 18%, resulting in negative real interest rates and rising policy uncertainty among investors already conscious of frequent changes of central bank governor.

As tourism and exports recover, the current account deficit is expected to narrow to 3% of GDP in 2021. The general government deficit is projected to decline to 3.4% in 2023 as temporary tax reductions and COVID-19 related transfers are reined in, the World Bank said.

"External risks are balanced, with the upside of a quicker-than-expected recovery in global demand being netted out by potential global financial market disruptions caused by future tightening expectations and supply chain constraints," the World Bank said.