Turkish Central Bank Says Economy Thrived in Pandemic Year: BHT

Turkey’s gross domestic product might have expanded as much as 2.5% last year, a performance better than all other major economies hit by the Covid-19 pandemic, BloombergHT reported, citing the central bank.

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The economy probably grew as fast as 8% in the last quarter of 2020 before its annual pace slowed to around 4%-5% during the first three months of this year, according to projections presented during Governor Naci Agbal’s meeting with economists in Istanbul.

The monetary authority shared other highlights from Tuesday’s meeting in a statement online but declined to comment on any specific remarks made during the event.

The challenge for Agbal is how to cool down growth to rein in inflation without triggering a steep slowdown in activity and a jump in unemployment. The governor took over in November after Turkey unleashed credit to mitigate the impact of the pandemic on the $750 billion economy.

For 2021, the government had originally penciled in GDP growth of 5.8% and a drop of about 1 percentage point in unemployment to 12.9%. But those targets were set by Berat Albayrak before he resigned as Turkey’s treasury and finance minister following the appointment of Agbal, an open critic of policies adopted under the former economy czar.

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Since his appointment, Agbal raised interest rates by a cumulative 675 basis points, returning to a more orthodox approach to monetary policy. The central bank left its benchmark rate unchanged at 17% at its last meeting, while pledging to keep it elevated for an “extended” period to contain inflation.

Agbal, who inherited double-digit inflation, a tumbling lira and foreign-currency reserves at record lows, said price stability will be a top priority this year, according to the bank’s summary of Tuesday’s meeting.