Moody's revises up Turkish economic growth forecast for 2023, 2024

By Ovunc Kutlu

ISTANBUL (AA) - Moody's revised up Turkish economic growth forecast for 2023 and 2024, as it also accounted for new economic activity associated with reconstruction in the regions destroyed by earthquakes.

The global rating agency expects Türkiye's real gross domestic product (GDP) growth at 2.3% this year, up from 2% in its previous projection; and at 4% next year, up from its earlier estimate of 3%.

"While large natural disasters such as earthquakes take an enormous toll on existing assets and suppress economic activity in the short term, subsequent, large-scale rebuilding efforts by the public and private sectors add to GDP," Moody's said Wednesday in its Global Macro Outlook 2023-24 report's February 2023 update.

"However, the speed with which business and households in the affected regions will get back on their feet is uncertain. Reconstruction, too, takes time. The pace of new activity owing to reconstruction each year and how resources may be shifted is also unknowable. Much will depend on the extent of fiscal and monetary policy support," it added.

Moody's noted that affected regions from earthquakes have a combined population of around 9.5 million, or 14% of Türkiye's population, and account for a 9.3% share of Turkish GDP, 11.2% of the country's industrial sector and 14% of agricultural production.

"We expect reconstruction spending to support economic growth in the coming quarters. However, it is too early to know the extent of supply disruptions, or the net impact on inflation and the economy. However, fiscal and monetary policy will likely remain very supportive and, as a result, inflation is likely to remain elevated," it said.

The agency emphasized that economic momentum in a number of large emerging market countries, including India, Brazil, Mexico and Türkiye, has proved to be more resilient than anticipated against monetary tightening in the global financial environment last year.

Moody's said it forecasts G-20 economic growth downshifting to 2% in 2023, from 2.7% in 2022, and then improve to 2.4% in 2024.

For American economy, the agency said it estimates annual real GDP growth of 0.9% this year, which is up 0.5 percentage points above its previous forecast. It, however, added that "contraction in the second half will leave the US economy with no growth in Q4 2023 relative to the same period of 2022," while it expects 1.1% expansion for the world's largest economy in 2024.

China's real GDP growth estimate was also raised to 5% for both 2023 and 2024, up from the previous expectations of 4%.