The economic repercussions in Turkey of the war in Ukraine are intensifying with the rise in prices which continues: inflation reached a new peak at 61.14% in March, up 5.46 points month on month. Above all, the conflict has pushed up the price of raw materials, particularly wheat and oil, of which Turkey is a major importer. It is particularly in the area of food that the price increase is the most impressive: food and non-alcoholic beverages are on average 70% more expensive today than a year ago. To fight against this inflationary spiral, the country is increasing the reductions in VAT on basic necessities. Last month, the authorities decided to reduce VAT from 18 to 8% on hygiene products, catering, electricity and medical equipment.
In this context, many institutions have revised downwards their growth forecasts for 2022 in the countries of the region, automatically affected by ricochet. The World Bank has lowered its forecast for Turkey from 2.0% to 1.4%, estimating that the war will have a greater impact than the pandemic. The growth rate forecast for 2022 of the EBRD for Turkey has also been revised downwards, from 3.5% to 2%. A forecast of 3.5% has been announced for 2023. As for the IMF, the institution now expects 2.8% growth in eurozone countries, a serious slowdown after the 3.9% anticipated in its previous forecast in January.
Despite a rather gloomy international climate, the month of April was characterized by significant investments on Turkish market. Foreign manufacturers, mostly of European origin, attracted by a manufacturing sector offering varied skills, continue to invest in Turkey and pursue their development in a strategic market offering significant growth opportunities.
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