The Turkish economy will grow 5.8% this year and return to a lower trend from 2022 onwards, the International Monetary Fund said on Friday, calling for steps to address high inflation and low reserves.
“Mainly reflecting a large positive carryover from the sharp activity rebound in the second half of 2020, growth should reach about 5.75% this year,” the Fund said in a statement concluding its 2021 Article IV consultation.
“With high external financing needs, sizeable domestic foreign exchange deposits, and low reserve buffers, the economy remains vulnerable to shocks and to changes in sentiment at home and abroad.”
The rapid economic recovery after the coronavirus outbreak with state bank-led credit growth and liquidity support was exceptional, the Fund said, adding that, however, policies fuelled inflation, dollarisation and external imbalances.
The Fund also underscored the importance of adopting policies to reduce vulnerabilities and committing to a firm monetary policy stance to fight inflation.
“Directors also emphasized the importance of strengthening central bank independence, rebuilding high-quality reserves, further simplifying the operational framework, and improving policy communication,” it said.
The lira has fallen some 11% so far this year, on top of double-digit falls in the past three years, while inflation is hovering around 17%.