IMF Staff Country Reports

Republic of Türkiye: 2022 Article IV Consultation-Press Release; and Staff Report

January 18, 2023

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Republic of Türkiye: 2022 Article IV Consultation-Press Release; and Staff Report, (USA: International Monetary Fund, 2023) accessed December 13, 2024

Summary

Türkiye’s recovery from the pandemic has been remarkable and reflects outsized stimulative policies and a dynamic private sector. But the same policies that buoyed growth also exacerbated vulnerabilities by lowering reserve buffers and increasing dollarization. A new policy model, introduced in the Fall of 2021, aims at further supporting growth and at lowering inflation by eliminating Türkiye’s current account deficit. The model relies on low interest rates and on measures to reduce dollarization, financial volatility, and overall credit growth, while directing lending to selected sectors. Successive policy rate cuts led to a run on the lira in December 2021, which was only relieved by large FX intervention and a new FX-protected deposit scheme. Since then, increasingly distortionary and complex macrofinancial and regulatory measures have been put in place to limit the lira decline. Meanwhile, inflation reached multi-decade highs, at 85 percent in October 2022. While Türkiye’s public debt burden is low compared to peers, fiscal risks have grown—notably from quasi-fiscal operations, contingent liabilities, and the exposure of public debt to FX shocks—and spending is expected to rise ahead of the upcoming elections. Spillovers from Russia’s war in Ukraine have added to Türkiye’s economic strains and have exacerbated external vulnerabilities, notably through a wider current account deficit.

Subject: Credit, Fiscal policy, Fiscal stance, Foreign exchange, Inflation, International organization, Monetary policy, Money, National accounts, Prices

Keywords: Credit, Deposit scheme, Fiscal stance, FX liquidity risk, Global, IFC portfolio implementation, IMF executive board, Inflation, Turkish lira, WBG portfolio

Publication Details

  • Pages:

    88

  • Volume:

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  • DOI:

    ---

  • Issue:

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  • Series:

    Country Report No. 2023/303

  • Stock No:

    1TUREA2023001

  • ISBN:

    9798400251139

  • ISSN:

    1934-7685