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Turkey’s economy rebounds to generate year on year growth


Turkey’s economy rebounds to generate year on year growth

Output rises 0.9% from previous year in third quarter in return to expansion

Turkey’s economy continued its gradual recovery from recession in the third quarter of this year, posting positive year-on-year growth for the first time in 2019.

Output increased by 0.9 per cent in the three months to the end of September compared to the same period in 2018, the Turkish Statistical Institute said on Monday. Turkey’s economy contracted 1.6 per cent on the same basis in the previous quarter.

On a quarterly basis, seasonally and calendar adjusted gross domestic product increased by 0.4 per cent. That figure was much lower than the consensus forecast of 1.1 per cent.

Growth was driven by the agricultural and industrial sectors, TurkStat said. Construction, which was once a key driver of the Turkish economy, continued its deep slump with a year-on-year contraction of 7.8 per cent.

Turkey suffered its first recession in a decade after a painful currency crisis that struck the country in the summer of 2018, which wiped almost 30 per cent off the value of the lira.

The contraction was shorter than most analysts expected as the government used fiscal stimulus and state-bank lending to reboot growth. But many economists warn that the country faces challenges in meeting president Recep Tayyip Erdogan’s desire to return to the fast-past growth of years past.

High indebtedness in the country’s corporate sector, which borrowed heavily in foreign currency over the past decade, has damped investment.

And efforts to use a new credit boom to kick-start growth risk reviving the country’s previous vulnerabilities, including high inflation and a large current account deficit, analysts say.

Data due to be published on Tuesday are expected to show a reversal of a year-long downward trend in inflation, complicating the task of the country’s central bank when it sets interest rates next week.

The bank has already slashed its benchmark rate by 10 percentage points so far this year, bringing it down to 14 per cent. But Mr Erdogan — a staunch opponent of high interest rates — has made it clear that he wants it to go further as he seeks to spur faster growth. The Turkish leader said last week that both inflation and interest rates would fall to single digits next year. While his government expects full-year growth of just 0.5 per cent this year, it has set an ambitious target of 5 per cent for 2020.

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