-EBRD’s commitment to Turkey could encourage potential investors
Following the annual meeting and business forum of the European Bank for Reconstruction and Development (EBRD) which took place last week in the Bosnian capital of Sarajevo, the EBRD released a report underlying the slowdown in countries that the bank invests in.
The report says the EBRD regions have been negatively affected by the considerable slowdown in global trade that emerged towards the end of 2018.
“Economic growth in the EBRD regions is broadly expected to track the global economy lower in 2019, before a likely upturn in 2020, when Turkey should return to positive territory following a contraction this year,” the statement read.
The EBRD’s latest economic outlook has revised down predictions for 2019. It now expects average growth across the EBRD economies of 2.3%, a 0.3 percentage point cut from the previous November forecast, and compared with 3.4% expansion in 2018. It forecasts a recovery to 2.6 % in 2020.
The report also says EBRD countries have become more exposed to external shocks because of greater integration with the global economy.
At the same time, countries are now better equipped to deal with such shocks because they have taken steps to increase their economic resilience, the bank said.
The EBRD expects growth in 2019 to moderate across virtually all the EBRD regions, with the exception of the southern and eastern Mediterranean.
The bank’s downward revision to overall growth forecasts primarily reflects the anticipated slowdown in Turkey.
Domestic demand has held up in most economies, with the notable exception of Turkey, where demand collapsed in the second half of 2018, the bank said.
The report says Turkey’s recovery from an expected 1.0% economic contraction in 2019 is likely to be gradual.
“The lira’s depreciation and high-interest rates will continue to dampen consumption and investment, although net exports should make a positive contribution to growth. Growth of around 2.5% is expected in 2020.”
In response to Anadolu Agency questions, Roger Kelly, the lead regional economist covering Turkey, Romania and Bulgaria in the Economics, Policy and Governance Department of the EBRD said, “Leading indicators seem to suggest that the downturn in the economy may have bottomed out in the first quarter of 2019 and that we may see the economy pick up in the coming months. To a certain extent, this may be due to the strong credit growth we have seen, driven by the state banks. Overall, the recovery of the economy is likely to be gradual.”
“The EBRD is maintaining a strong focus on Turkey and the country remains by far the largest portfolio among the 38 economies where the Bank currently invests.” Kelly added.
Despite the temporary slowdown in the Turkish economy, the EBRD is still assured over the long-term economic growth potential of the country and its commitment to Turkey might well encourage potential investors looking for higher yields in this dynamic emerging market in the long term.
