Turkey: macro-financial situation

Abstract

In 2021, the Turkish economy continued to be highly influenced by the course of the COVID-19 pandemic. Turkey has been more dynamic than other emerging economies since the start of the pandemic, but faces a number of macro-financial challenges as a result of imbalances that have become more acute during the crisis. These include, notably, high and persistent inflation, sizeable external financing needs (non-financial corporations have high levels of foreign currency-denominated debt), low international foreign currency reserves and growing bank deposit dollarisation. The banking sector remains relatively sound and its NPL ratio has declined, although some of its other indicators, such as profitability and solvency ratios, have slightly worsened.