The World Bank Lowers Turkey’s 2021 Economic Growth Forecast on Account of High Interest Rates

The World Bank’s Global Economic Prospects report released in early January 2021 forecasts Turkey’s gross domestic product (GDP) to increase by 4.5% year-on-year (YoY) in 2021, down from the previous estimate of 5.0%.

The forecast was downgraded due to the spike in COVID-19 cases, a tight monetary policy (increase in interest rates), as well as the likelihood of lower tourism revenues.

Coming out of an anticipated 0.5% YoY economic growth in 2020, the World Bank states that tourism-dependent nations are likely to experience weaker-than-anticipated economic growth, if the downturn in international travel prevails.

In 2020, the Central Bank of Turkey increased its interest rate by more than double with rates up as high as 17.0% since September 2020...