The rating agency revises Turkey's economic growth rate to 4 and 5 percent for 2021 and 2022, respectively.

A Moody’s sign is displayed on 7 World Trade Center, the company’s corporate headquarters in New York, February 6, 2013.
A Moody’s sign is displayed on 7 World Trade Center, the company’s corporate headquarters in New York, February 6, 2013. (Brendan McDermid / Reuters)

Moody's has revised Turkey’s economic growth forecast to 1.1 percent for 2020 from a 5 percent contraction and 4 percent for 2021 from 3.5 percent.

According to a report published by Moody's, the country's rate for 2022 was also revised up from 4 to 5 percent.

The report noted gross domestic product (GDP) is expected to increase in all G20 economies.

"But some countries may take longer than others to return to full capacity. Fiscal and monetary policy response will play an important role in this as well as the management of the pandemic."

G20 countries are expected to grow by 5.3 percent in 2021 and 4.5 percent in 2022, while the rate in the eurozone is estimated to be 3.7 percent this year and 3.9 percent next year.

On the other hand, the report pointed out the growth rate in the eurozone contracted around 7.1 percent in 2020.

The eurozone represents member states of the EU that use the single currency — euro.

The report also underlined that the US economy is expected to grow by 4.7 percent in 2021 and 5 percent in 2022.

READ MORE: OECD revises up Turkey’s growth forecast for 2020

Fitch also revised its rating

US-based global credit body Fitch Ratings has also revised Turkey's outlook from "negative" to "stable."

"Turkey's return to a more consistent and orthodox policy mix under a new economic team has helped ease near-term external financing risks derived from last year's falling international reserves, a high current account deficit and deteriorating investor confidence," the company said last week.

The agency highlighted that the Turkish central bank, under its new leadership, has simplified monetary policy to improve transparency and predictability, strengthened its communication strategy and increased its tightening by raising interest rates by 675 basis points during the months of November and December.

While Fitch said Turkey's credit rating is supported by moderate levels of government and household debt, a large and diversified economy with a vibrant private sector, it pointed to weak external finances, economic volatility, high inflation, increased dollarisation, in addition to political and geopolitical risks.

Turkey's current account deficit is expected to fall to 2.9 percent in 2021 and 2.1 percent of GDP in 2022, from 5.3 percent in 2020, due to slower domestic demand and reduced gold imports, according to Fitch.

READ MORE: Turkey: Economy in rapid normalisation process as of July

Source: TRTWorld and agencies