Turkish economy returns to growth in the third quarter

Turkish economy returns to growth in the third quarter
Turkey’s economy broke three consecutive quarters of contraction as it shook off the effects of recession following last year’s currency crisis. (AFP)
Updated 02 December 2019

Turkish economy returns to growth in the third quarter

Turkish economy returns to growth in the third quarter
  • Turkey’s economy grew 0.9 percent year-on-year in the third quarter
  • As the economy has recovered, inflation tumbled to single digits in October due to base effects

ISTANBUL: Turkey’s economy grew 0.9 percent year-on-year in the third quarter, in line with expectations, breaking three consecutive quarters of contraction as it shook off the effects of recession following last year’s currency crisis.
Compared to the second quarter, gross domestic product (GDP) expanded by a seasonally and calendar-adjusted 0.4 percent, its third positive quarter-on-quarter reading in a row, the Turkish Statistical Institute data showed.
A Reuters poll forecast the economy would expand 1 percent year-on-year in the third quarter. It also predicted that the economy will grow 0.5 percent in 2019 as a whole.
The major emerging market economy has a track record of 5 percent growth, but a near 30 percent slide in the lira’s value last year pushed up inflation and interest rates, while domestic demand tumbled.
The third quarter growth was driven by the agricultural sector which expanded 3.8 percent, while industry grew 1.6 percent and services grew 0.6 percent. The construction sector shrank 7.8 percent.
The lira was at 5.7435 against the dollar, weakening slightly from 5.74 beforehand.
As the economy has recovered, inflation tumbled to single digits in October due to base effects, and loan growth picked up thanks to central bank rate cuts. In the second quarter, the economy shrank a revised 1.6 percent year-on-year.
In late October, the central bank slashed its policy rate more than expected to 14 percent, continuing an aggressive bout of cuts from 24 percent since July to help revive the recession-hit economy.
The central bank governor subsequently said the bank had used a significant part of its leeway for loosening monetary policy. Last week, he said the bank will use required reserves to support real sector access to loans and loan growth.
Industrial production, a key signal of economic activity and widely regarded as an indication of growth, expanded 3.4 percent year-on-year in September.
The government’s own sharply lowered forecast for the year envisages growth at 0.5 percent in 2019, and 5 percent in 2020.