Despite 7-pct-growth in Q1, Turkey's economy remains at risk

Source: Xinhua| 2021-05-31 19:25:22|Editor: huaxia
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ISTANBUL, May 31 (Xinhua) -- Turkey's economy expanded by 7 percent in the first quarter of 2021, a robust growth rate which is expected to continue throughout the year, but challenges remain amid a series of setbacks, experts said.

The growth was higher than expected, the Turkish Statistical Institute announced on Monday. The country's GDP grew 1.8 percent last year amid the COVID-19 pandemic.

According to the Treasury and Finance Ministry, Turkey expects its gross domestic product to grow over 5 percent this year, helped by a growth in exports of between 16 percent and 20 percent.

"The Turkish economy showed a strong growth effect in the first quarter of 2021 ... We expect the second-quarter period to have the effect that will push this year's growth up with 2020's strong base effect," Enver Erkan, chief economist at Tera Securities, told Xinhua.

However, he noted that this recovery was heavily supported by a credit boom, encouraged by the government.

"As the side effects of this, the lira became unstable, inflationary pressures increased, and as a result, the Central Bank tightened its monetary policy by lifting interest rates," Erkan added.

The country's policy interest rate currently stands at 19 percent.

Turkey recently eased coronavirus restrictions, but kept the overnight and weekend curfews in place to reduce daily cases, which hit record highs of over 60,000 in April.

The Turkish government is likely to further lift measures as of Tuesday as the number of COVID-19 cases dropped below 7,000.

Yet challenges remain, and the outlook for 2021 is uncertain as the country confronts high inflation.

Turkey's central bank recently raised its year-end inflation expectation to 12.2 percent from 9.4 percent amid a rising consumer prices rate, which hit 17.1 percent in April.

It is unknown how the pandemic will affect tourism, a vital sector accounting for some 12 percent of the country's GDP.

The government is pinning its hopes on the industry, with a target of 20 billion U.S. dollars in tourism revenue and 30 million foreign visitors this year.

Turkey's embattled lira tumbled to an all-time low of 8.60 versus the dollar on Friday, due to global inflation concerns and reports that the country's central bank could proceed to a rate cut in June.

The greenback traded at 8.51 against the lira on Monday. The Turkish currency has lost 16 percent since mid-March.

"The lira is the worst performer among emerging markets, and this trend is making Turkey more vulnerable to external shocks and eroding its credibility," Emre Alkin, a finance professor from Istanbul's Altinbas University, said in a video blog.

"The declining lira is adding to the economy's growing uncertainties," he said. Enditem

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