Turkish economy grew 2.3% in 2020 despite pandemic

ISTANBUL: Turkey's economy grew at a hot 7.1% pace in the fourth quarter and logged 2.3% growth in 2020 as a whole, emerging as one of the few countries to avoid a contraction amid the coronavirus pandemic, a Reuters poll showed on Wednesday.

For 2021, gross domestic product (GDP) is estimated to grow by 4.5% as the economy continues to rebound, according to the median estimate of 11 economists in the Reuters poll.

The major EM economy expanded 4.5% year-on-year in the first quarter when social and business curbs were imposed, leading to a 9.9% contraction in the second. It rebounded 6.7% in the third quarter as state banks offered cheap credit and as restrictions were lifted.

The median forecast of 16 economists for the fourth quarter was for 7.1% year-on-year growth with estimates ranging between 3% and 8.3%. The median estimate of 2.3% for 2020 was based on 19 respondents.

Last year the government had forecast GDP growth of 0.3%.

In a list of selected large economies, the IMF forecasted expansions in only Turkey, China and Egypt in 2020 due to pandemic fallout, based on its January World Economic Outlook Update.

"After historically high credit growth last year to fight the pandemic's effect on the economy, credit growth is now negative (and the) focus has shifted from growth to price stability in November," BofA said in a client note that raised growth forecasts for 2020 and 2021.

Faced with a second COVID-19 wave, the government imposed new measures at the end of last year but sought to free up supply and production chains. Ankara is considering lifting some restrictions as of March.

Seen as a precursor to growth figures, industrial production expanded 10.1% year-on-year in the fourth quarter.

"Indicators still show growing demand for manufacturing despite COVID-19 restrictions," BofA added.

Although the new economy management "is keen on slowing domestic demand to help bring down inflation, pent-up demand and opening of the services sector can put more pressure on inflation."

Turkey's economy, which has expanded 5% on average over the last two decades, has languished well below those levels for the last few years, growing just 0.9% in 2019.

The Turkish Statistical Institute is expected to announce fourth quarter GDP data at 0700 GMT on March 1.