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The Turkish economy contracted by 9.9% in yearly terms in the second quarter of 2020, point out analyst at BBVA Research. They argue growth rates in services and industry, sensitive to the Covid-19 shock, were the key factors behind the contraction. They expect 1% GDP contraction in 2020 and 5.5% GDP growth in 2021.

Key Quotes: 

“The negative impact of the Covid shock deepened in 2Q20 and economic activity contracted by 9.9% in annual terms, led by the historically deepest quarter-on-quarter contraction of 11%.”

“We have recently adjusted our 2020 GDP growth forecast to -1.0% from the previous 0% on the back of the recent monetary tightening and financial volatility, but maintained our initial forecast range between -3% and +1%.”

“While the recent financial tightening and uncertainties led us to adjust our GDP forecasts to -1%, we maintain our initial forecast range between -3% and +1% for 2020. How ever, the intense recovery in 3Q20 already poses some upside risks. In any case, Turkey´s GDP will outperform the rest of the EMs and gloomier expectations should be ruled out. GDP growth might converge to 5.5% in 2021.”

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