IMF anticipates Turkey's economy to shrink 5 percent in 2020

Uğur Gürses 

According to the International Monetary Fund's (IMF) World Economic Outlook report, a worldwide recession of 3 percent is anticipated for 2020, while Turkey's economy is expected to shrink by 5 percent this year. 

The IMF's expectations are based on the assumed scenario that the global coronavirus pandemic will start to disappear in the second half of 2020 and quarantine conditions will be gradually scaled back. 

The major economic losses are expected to be sustained during the second quarter, between April and June, while there is the assumption that recovery will follow in the aftermath. 

The IMF anticipates that countries that have been severely affected by the pandemic will lose 8 pct. of their working days during 2020, while countries that took better preventative measures such as social distancing will lose 5 pct. of their working days for the year. It has prepared a main scenario as well as several alternative scenarios for worldwide growth figures based on the extent to which the coronavirus pandemic continues. 

The main scenario involves a global recession of 3 percent in 2021 but a rebound in 2021 with growth of 5.8 percent. The first alternative scenario anticipates worldwide losses of 6 pct. in the event that the pandemic persists longer than expected. The second alternative scenario stipulates that if a second wave of the pandemic strikes in 2021, average global economic growth will be limited to 0.8 pct.  

The final scenario indicates that if both the first and second alternative scenarios take place, the 2020 recession will climb to 4 percent in 2020 and 2.1 percent in 2021. 

The IMF's chief economist Gita Gopinath said there are reasons to be optimistic and that strong social distancing implementation has led to a drop in the number of new cases, and that countries are taking quick and comprehensive steps with their economic policy in order to create a shield for individuals and companies alike. 

While the IMF anticipates that Turkey's economy will shrink by 5 pct. in 2020, it is predicting 5 pct. growth in 2021. Inflation figures are estimated to be 12 pct. for both this year and next year, while unemployment rates are expected to be 17.2 pct. this year, slightly receding to 15.6 pct. in 2021. 

Given that the IMF's forecasts are always somewhere between “moderate” and “cautious,” realistic expectations are likely to result in a more negative picture. The best example is this: when the IMF is predicting Turkey's current account surplus will account for 0.4 percent of the country's GDP, it is not taking into account the loss of roughly $20 billion, which is quite an optimist figure.