Fitch downgrades Turkey’s economic growth forecast

SHAFAQNA TURKEY – Fitch has released its March Global Economic Outlook report. While noting that Fitch has raised its global growth outlook for the first time since the Russo-Ukrainian war began, the report says the growth in question reflects the reopening of China after COVID-19 restrictions, the easing of the gas crisis in Europe, and the resilience of consumer demand in the US .

The global growth forecast, which stood at 1.4 percent in the December report, has been raised to 2 percent and growth expectations for 2024 have been cut from 2.7 percent to 2 percent with the lagging effect of rapid interest rate hikes, the report notes. The US Federal Reserve System (FRS) and the European Central Bank (ECB) announced that it fell to 0.4.

It was stressed that exports have slowed down

The report indicated that China’s lifting of COVID-19 restrictions at the start of the year was followed by a rapid improvement in business survey numbers, and highlighted that contact-intensive consumer spending, which declined due to restrictions in 2022, quickly recovered. but the real estate sector remained weak and exports slowed.

Upward revision of growth forecasts for the US, Eurozone and China

China’s growth forecast for 2023 has been revised down from 4.1 percent to 5.2 percent in December, the eurozone from 0.2 percent to 0.8 percent and the US from 0.2 percent to 1 percent.

Fitch’s forecast for growth next year was 0.8% for the US, 1.4% for the Eurozone and 4.8% for China.

Recalling that the European gas crisis has eased in recent months, the report notes that this situation has improved euro zone growth expectations and reduced underlying inflationary pressures.

The recession is expected to start at the end of the third quarter

Highlighting that the US economy gained more momentum than expected in the short term thanks to strong growth in employment and consumption at the beginning of the year, it was said that household income growth continues, and savings reserves built during the pandemic will support spending for a while. .

The report indicated that a recession is expected in the US economy, albeit with a delay, and that the start of the recession in question is expected at the end of the third quarter.

“Fed and ECB are concerned that inflation will become constant”

The report explains that the Fed and the ECB have become more worried that inflation will become permanent, and remind that labor market imbalances, which are a source of pressure on wages, persist.

The Fed’s interest rate is expected to peak at 5.5% and the ECB’s refinancing rate at 4% in June.

The report highlighted that monetary tightening had taken longer than expected to slow U.S. demand, and noted that it was thought that higher interest rates would eventually put pressure on activity.

Turkish Economic Growth Forecast

While noting that the February quake is likely to affect Turkey’s short-term economic conditions, the report highlights that growth is expected to pick up in the third quarter thanks to restructuring programs.

The report says the Turkish economy is expected to grow by 2.5 percent this year and 3 percent in 2024.. Fitch previously forecast Turkey to grow by 2.9% in 2023 and 2024.