Turkey’s finance minister concedes economy at risk of shrinking

Turkey’s economy is in danger of contracting this year after the coronavirus pandemic hit economic activity in the second quarter, the country’s finance minister has said, acknowledging that his previous forecast of a 5 per cent expansion was no longer within reach.

Berat Albayrak told a Turkish television channel that this year the country’s economy could shrink by up to 2 per cent, or expand by a maximum of 1 per cent. But estimates from international institutions for an even sharper contraction were baseless, he said in the interview late on Wednesday evening.

The IMF forecasts that the Turkish economy will contract by 5 per cent in 2020, while the World Bank’s baseline scenario is for a 3.8 per cent fall.

Mr Albayrak said the sharp decline in the lira had made Turkey more competitive in attracting tourists and selling goods overseas, adding that he was not worried about the exchange rate. The currency has lost about a fifth of its value against the dollar this year.

Goldman Sachs estimates that Turkey spent about $65bn of its central bank foreign currency reserves in June and July on efforts to keep the currency stable, but since the start of August it appears to have abandoned the attempt.

The central bank has rebuffed calls to raise its benchmark interest rate to stem…

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