The Turkish economy, expected to shrink in 2021 like many other countries due to the coronavirus, will bounce back 6% in 2021, the European Bank for Reconstruction and Development (EBRD) said on Wednesday.
"Turkey is likely to see a contraction of 3.5% in 2020 because of the economic impact of the coronavirus pandemic," the bank stressed in a press release.
While weaker tourism revenues and export demand are among the main problems, lower oil prices – by providing dependence on imported energy and decreasing inflation – may relieve the country's economy, it said.
It added: “With the non-performing loan ratio standing at a 10-year high of 5.3%, the weakness of the lira and contractions in tourism, retail and export sectors are likely to put further stress on the already strained asset quality of banks, particularly in light of the large foreign-exchange-denominated debt overhang in the corporate sector."
Countries in the bank's region are expected to contract 3.5% this year on average and rebound 4.8% next year, it also noted.
Beata Javorcik, a chief economist in the bank, said: "This is not the time to engage in economic nationalism and protectionism, but a time to shape a better future through international commitment to free trade, climate change mitigation and economic cooperation."
Turkey's economy expanded 2.6% in 2018 and 0.9% in 2019.
- Oil prices
Asked if Turkey could benefit from low oil prices, Roger Kelly, the bank’s lead regional economist covering Turkey, Romania and Bulgaria, told Anadolu Agency: “This is certainly the case for Turkey. It is one of the number of countries that benefit from when oil prices fall. One of the perpetual concerns we have for size of the Turkey’s current account deficit. One of the key contributors to this deficit is energy imports.”
He added: “The cost of energy is going down. We expect a $10 oil price drop to trim around $3.5-4 billion [from the current accounts deficit]. On top of the current account impact, there is disinflationary impact, a $10 drop in oil prices would translate just under 1 percentage point inflation. This would also provide some sort of support for Turkey.”
He also said global supply disruptions might change the manufacturing landscape in the future, bringing supply chains closer to home.
“Interruptions we have seen in global supply chains, driven because of the response of the pandemic, certainly have given a lot of producers around the world some thoughts,” he said.
After originating in China last December, COVID-19 has spread to at least 187 countries and regions. Europe and the US are currently the worst-hit areas.
Measures to stem the spread of the virus caused economic slowdown across the globe, especially in the aviation, travel, tourism and manufacturing sectors.
The pandemic has killed nearly 293,500 people worldwide with over 4.29 million confirmed cases, while recoveries have surpassed 1.51 million.
In Turkey, as of Tuesday, the virus has infected 141,475 people so far, and caused 3,894 deaths.
By Gokhan Ergocun and Gokhan Kurtaran