Bank of America Merrill Lynch (BAML) has revised Turkey’s economic growth forecast downwards for 2020 due to the impact of the COVID-19 pandemic.
BAML had previously projected a 2.5 % growth outlook for Turkey but is now predicting that the economy will contract by 2.3 percent as a result of the pandemic.
BAML forecasts the world economy will shrink by 2.7 percent this year.
The firms’ top economists commented that there was a shift from globalization to localization and other global macro trends underpinning economic growth.
They said the past three decades had seen Turkey experience economic growth fuelled by the benefits of globalization such as an unchecked, cross-border free flow of goods, people and capital that rewarded cheap labor and low consumer prices.
The United Nations (U. N.) is more optimistic.
“The global economy could shrink by up to one percent in 2020 due to the COVID-19 pandemic, and may contract even further if restrictions on economic activities are extended without adequate fiscal responses, ” a recently released UN Department of Economic and Social Affairs analysis states.
Turkey’s economy fell into its first recession in a decade at the end of 2018 and the currency depreciated in the same year causing severe stress to Turkey’s financial systems. The country trying to keep wheels of the economy turning despite the worsening fallout from COVID-19 pandemic.
On April 2, Turkey had more than 17,000 confirmed coronavirus cases and 277 had died as a result of the virus.
Although many small businesses in the service sector are closed, banks, insurance firms have switched to working from home, while in the manufacturing sector many firms are still operating.
The badly hit tourism sector which generates approximately $30 billion in revenue annually is set to take a big knock, especially as the country’s peak tourist starts this month and ends in September – with no sign of the tourist arrivals.
An estimated 2.5 million workers in the sector are likely to lose a big portion of their income this year.
Economists say the Turkish government’s 100 billion lira ($15 billion) rescue package announced last week, will not save the economy as Turkey’s exports slid by an annualized 18 percent in March, dropping to $13.4 billion.