Turkish economy grows 3.1% in Q2

Turkey's President Recep Tayyip Erdogan addresses a rally in Gaziantep, Turkey. (AP)

ISTANBUL: Turkey's economy grew 3.1 percent in the second quarter, slowing sharply from the strong figure of the first quarter in a potentially worrying development for the government of President Recep Tayyip Erdogan, statistics showed Friday.
Gross domestic product (GDP) had grown a revised 4.7 percent on the first quarter of 2016, a figure that surprised economists who feared the economy would be hurt by the country's political and security instability.
The growth figure of 3.1 percent for the second quarter meant that the economy grew 3.9 percent in the first half of 2016. Growth in 2015 was 4.0 percent.
The key driver of the continued growth in Turkey was household consumption, which grew 5.2 percent in the second quarter but well down on the first quarter, according to the data released by the Turkish Statistics Institute.
Government consumption expenditure also ticked up almost 16 percent.
But analysts said that the slowdown in growth in the second quarter — which was sharper than expected by the markets — could be a harbinger of difficult times ahead for the economy. The April-June second quarter predates the July 15 failed coup in Turkey, which is expected to have had a negative impact on economic performance.
“We expect growth to be much weaker in the coming quarters,” said William Jackson, senior emerging markets economist at Capital Economics in London.
He said there was a “real possibility” that GDP could contract in quarter-on-quarter terms in the next third quarter.
The growth figure comes a day after statistics showed that industrial production plummeted 4.9 percent in July from the same month the year earlier and fell 7 percent from June.
The government and central bank also have to balance countering the growth slowdown with fighting Turkey's persistently high inflation, which was 8.05 percent in August, still well over the official target of five percent.
“The (GDP) data confirmed that the economy continued to grow at a decelerating pace in the second quarter,” said Ozgur Altug at BGC Partners in Istanbul.
He predicted full year growth would be 3.3 percent compared with the government forecast of 4.5 percent.
Deputy Prime Minister Nurettin Canikli admitted that the figure was “below target” and said the recent events in Turkey had began to take their toll on the data.