Dark forecast for Turkey – Moody's warns against a significant contraction in the economy


Turkey and Argentina will experience a significant contraction in coming quarters, with growth rates slowing in the advanced and emerging economies, Moody's Investors Service said in a report released on Thursday, Agerpres told Bloomberg.

As the monetary tightening in major economies and global trade disputes will continue to undermine global investment, Moody's has taken a pessimistic view of the growth prospects of emerging economies such as Turkey and Argentina that "have a relatively high exposure to finance eternal and therefore the most vulnerable. "

According to Moody's, Turkey's economy is expected to contract in the middle of next year, as the collapse of the pound and rising borrowing costs would have an effect on the economy. In addition, Argentina's economy will not recover until 2020 due to severe monetary and fiscal consolidation, in line with the program agreed with the International Monetary Fund, says Moody's.

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Currently, the inflation rate in Turkey is at the highest level in the last 15 years, and the high borrowing costs affect the investment outlook.

"Double-digit inflation, a significant increase in borrowing costs and a decline in bank lending may affect households' purchasing power, private consumption and investment," Moody's says.

The rating agency expects inflation in Turkey to remain double-digit by 2020, as inflationary pressures will be stimulated by exchange rate pressures and oil prices. In October, the annual inflation rate in Turkey rose to 25.2%, as the pound depreciation stimulated fuel prices.

Analysts at Moody's say Turkey's economy will post a gain of 1.5% in 2018, after which it will contract 2% in 2019. In the case of Argentina, Moody's forecasts a contraction of 2, 5% this year and one of 1.5% in 2019.


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