Although the novel coronavirus caused a decline in economic activity and employment in the second quarter of 2020, the IMF said the initial policy response to the pandemic led to a sharp rebound in gross domestic product (GDP).

In this file photo an exterior view of the building of the International Monetary Fund (IMF), with the IMG logo, is seen on March 27, 2020 in Washington, DC.
In this file photo an exterior view of the building of the International Monetary Fund (IMF), with the IMG logo, is seen on March 27, 2020 in Washington, DC. (AFP Archive)

The International Monetary Fund (IMF) has said that it expects Turkey's economy to expand by around six percent in 2021 with the country’s Covid-19 vaccine rollout and recovery in trading partner growth.

"Inflation is expected to fall modestly by end-2021…and the current account deficit is expected to fall to 3.5 percent of GDP, in large part reflecting lower gold imports and a modest recovery of tourism," it said.

"Employment is expected to continue to recover slowly as the pandemic subsides," the IMF said in its concluding statement of the 2021 Article IV Mission, which marks the end of an official staff visit to the member country.

Although the novel coronavirus caused a decline in economic activity and employment in the second quarter of 2020, the IMF said the initial policy response to the pandemic led to a sharp rebound in gross domestic product (GDP).

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

"The early stimulus relied primarily on rapid monetary and credit expansion, including policy rate cuts, cheap and rapid lending growth by state-owned banks, and administrative and regulatory measures designed to boost credit," the statement said.

"Despite some fiscal space, direct fiscal measures amounted to just 2.5 percent of GDP, mainly in the form of tax deferrals, but also including employment support," it added.

The IMF emphasised that these measures helped economic activity rebound strongly in the third quarter to above pre-pandemic levels in Turkey, which is among the few countries estimated to have posted positive overall growth in 2020.

The international financial institution, on the other hand, pointed out to some risks, such as inflation remaining well above target, further weighing on policy credibility, increased dollarisation, as well as high imports, financial outflows and large-scale foreign exchange intervention to stem the Turkish lira's depreciation.

Some other factors that leave Turkey's economy vulnerable to shocks include low foreign exchange reserves and high external financing needs, according to the IMF.

Source: AA