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Turkey: Macro-Financial situation

Author

Listed:
  • Juan Carlos Berganza
  • Paula Sánchez Pastor
  • Begoña Lara

Abstract

As in other countries, the effect of the pandemic and the global recession on the Turkish economy was mitigated by the fiscal, financial and monetary support implemented by the country’s authorities. In fact, Turkey was one of the few economies of significant size to record positive GDP growth in 2020 as a whole. However, this policy support also exacerbated the pre-existing macroeconomic imbalances. First, the sharp increase in credit is among the determinants behind the growth in domestic demand. Second, a notable weakening of the lira was observed, leading the already-high inflation rate to rise further. However, in the final stretch of the year the Turkish central bank shifted towards more orthodox monetary policy, helping to restore – at least in part – investor confidence. The banking sector has remained healthy, although overall asset quality has deteriorated as exposure has increased.

Suggested Citation

  • Juan Carlos Berganza & Paula Sánchez Pastor & Begoña Lara, 2021. "Turkey: Macro-Financial situation," Economic Bulletin, Banco de España, issue 1/2021.
    • Handle: RePEc:bde:journl:y:2021:i:01:d:ne:n:02
    Note: Economic Notes
    as

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    More about this item

    Keywords

    Turkish economy; macroeconomic imbalances; current account balance; capital flows; monetary policy and inflation; Turkish lira; international reserves; bank lending.;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems

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