ISTANBUL (Reuters) – Turkey’s economy is expected to contract this year for the first time in more than a decade as the coronavirus pandemic and related restrictions hit demand, but will bounce back next year, according to a Reuters poll published on Friday.
The median forecast in a July 21-23 survey of 42 economists in and outside the country was for a contraction of 4.3% in 2020, with drops in the second and third quarters of 12.2% and 3.1% respectively.
But the Turkish economy is expected to grow next year by 4.5%, according to the median forecast.
“We are seeing a U-shaped recovery in the Turkish economy right now … However, the uncertainties about a possible second wave of the outbreak necessitates a cautious approach to these economic recovery scenarios,” said Enver Erkan, economist at Tera Yatirim.
There are downside risks to growth next year, Erkan said, adding that tensions between the United States and China will have an impact too.
“I am not saying everything will be alright in 2021, we will be in a process of changing back,” he said.
The government had forecast 5% economic growth this year before the coronavirus outbreak and has since maintained the economy could still grow this year, following a robust 4.5% expansion in the first quarter.
But economic activity declined sharply in the second quarter as Ankara shut schools and some businesses, closed borders and adopted weekend lockdowns to slow the spread of the coronavirus. It has started taking steps to re-open the economy since June.
POLICY RATE
Turkey’s economy last contracted on an annual basis in 2009, by 4.7%. From 2010 to 2018, its average growth rate was more than 5% thanks mainly to a construction boom driven by cheap capital following the global financial crisis.
A currency crisis in 2018 was set off by concerns over central bank independence and tensions between Ankara and Washington. That led to three straight quarters of economic contraction and a modest annual growth rate of 0.9% last year.
Since last year, the central bank has cut rates to 8.25% from 24%, at first to pull the economy out a recession and later to counter the impact of the coronavirus pandemic.
In the poll, economists predicted the central bank would cut its policy rate to 8.00% by the end of this year.
It has bought up government debt at record levels since the end of March in the face of the outbreak. Economists have said the bond buying scheme and use of reserves to boost the Turkish lira have left the central bank with less room to manoeuvre.
“(The central bank moves) bears the risk of raising inflation, further deteriorating investor confidence and triggering another balance-of-payments crisis,” Allianz said in a note.
Allianz predicts Turkey will return to its pre-crisis level of GDP in mid-2022.
Inflation, which has hovered around 12% the last few months, was expected to decline to 10.2% by the end of the year and to 9.9% by the end of 2021.
The current account balance, which recorded a rare surplus last year as the economy slowed, has since returned to a deficit. The deficit is expected to stand at 2.3% of GDP this year and next, according to the poll.
(For other stories from the Reuters global long-term economic outlook polls package:)
(Polling by Manjul Paul in Bengaluru; Writing by Ezgi Erkoyun; Editing by Alison Williams)
TORONTO – Canada’s main stock index was higher in late-morning trading, helped by strength in energy stocks, while U.S. stock markets also moved up.
The S&P/TSX composite index was up 34.91 points at 23,736.98.
In New York, the Dow Jones industrial average was up 178.05 points at 41,800.13. The S&P 500 index was up 28.38 points at 5,661.47, while the Nasdaq composite was up 133.17 points at 17,725.30.
The Canadian dollar traded for 73.56 cents US compared with 73.57 cents US on Monday.
The November crude oil contract was up 68 cents at US$69.70 per barrel and the October natural gas contract was up three cents at US$2.40 per mmBTU.
The December gold contract was down US$7.80 at US$2,601.10 an ounce and the December copper contract was up a penny at US$4.28 a pound.
This report by The Canadian Press was first published Sept. 17, 2024.
OTTAWA – Canada’s inflation rate fell to two per cent last month, finally hitting the Bank of Canada’s target after a tumultuous battle with skyrocketing price growth.
The annual inflation rate fell from 2.5 per cent in July to reach the lowest level since February 2021.
Statistics Canada’s consumer price index report on Tuesday attributed the slowdown in part to lower gasoline prices.
Clothing and footwear prices also decreased on a month-over-month basis, marking the first decline in the month of August since 1971 as retailers offered larger discounts to entice shoppers amid slowing demand.
The Bank of Canada’s preferred core measures of inflation, which strip out volatility in prices, also edged down in August.
The marked slowdown in price growth last month was steeper than the 2.1 per cent annual increase forecasters were expecting ahead of Tuesday’s release and will likely spark speculation of a larger interest rate cut next month from the Bank of Canada.
“Inflation remains unthreatening and the Bank of Canada should now focus on trying to stimulate the economy and halting the upward climb in the unemployment rate,” wrote CIBC senior economist Andrew Grantham.
Benjamin Reitzes, managing director of Canadian rates and macro strategist at BMO, said Tuesday’s figures “tilt the scales” slightly in favour of more aggressive cuts, though he noted the Bank of Canada will have one more inflation reading before its October rate announcement.
“If we get another big downside surprise, calls for a 50 basis-point cut will only grow louder,” wrote Reitzes in a client note.
The central bank began rapidly hiking interest rates in March 2022 in response to runaway inflation, which peaked at a whopping 8.1 per cent that summer.
The central bank increased its key lending rate to five per cent and held it at that level until June 2024, when it delivered its first rate cut in four years.
A combination of recovered global supply chains and high interest rates have helped cool price growth in Canada and around the world.
Bank of Canada governor Tiff Macklem recently signalled that the central bank is ready to increase the size of its interest rate cuts, if inflation or the economy slow by more than expected.
Its key lending rate currently stands at 4.25 per cent.
CIBC is forecasting the central bank will cut its key rate by two percentage points between now and the middle of next year.
The U.S. Federal Reserve is also expected on Wednesday to deliver its first interest rate cut in four years.
This report by The Canadian Press was first published Sept. 17, 2024.
FREDERICTON – New Brunswick‘s finance minister says the province recorded a surplus of $500.8 million for the fiscal year that ended in March.
Ernie Steeves says the amount — more than 10 times higher than the province’s original $40.3-million budget projection for the 2023-24 fiscal year — was largely the result of a strong economy and population growth.
The report of a big surplus comes as the province prepares for an election campaign, which will officially start on Thursday and end with a vote on Oct. 21.
Steeves says growth of the surplus was fed by revenue from the Harmonized Sales Tax and federal money, especially for health-care funding.
Progressive Conservative Premier Blaine Higgs has promised to reduce the HST by two percentage points to 13 per cent if the party is elected to govern next month.
Meanwhile, the province’s net debt, according to the audited consolidated financial statements, has dropped from $12.3 billion in 2022-23 to $11.8 billion in the most recent fiscal year.
Liberal critic René Legacy says having a stronger balance sheet does not eliminate issues in health care, housing and education.
This report by The Canadian Press was first published Sept. 16, 2024.
