Slower quarterly growth threatens 2014 target as government hints revision

ANKARA

Gross domestic product (GDP) grew 2.1 percent year-on-year in the second quarter, according to data published by the Turkish Statistical Institute (TÜİK). DHA Photo

Turkey’s economy continued to grow for 19th in a row but at a lower than expected pace in the second quarter of this year, according to data published by the Turkish Statistical Institute (TÜİK).

Turkey’s gross domestic product (GDP) grew at a rate of 2.1 percent between April and June, according to figures announced by the TÜİK, which revealed that threats to the main indicators affected growth more severely than analysts had foreseen.

Mainly based on the weak performance of industry and trade, analysts predicted that growth would slow to around 2.65 to 2.80 percent in the second quarter, but the official figure was lower than analysts had hoped.

TÜİK had previously revised its announcement of growth data for 2013 and the first quarter of 2014, changing the 2013 growth rate to 4.1 percent from 4 percent and the 2014 first quarter data to 4.7 percent from 4.3 percent.

Therefore, the Turkish economy’s overall first half growth rate was at 3.3 percent, increasing pressure on the government and the Central Bank to attain their official year-end target of 4 percent.

However, the government’s finance minister blamed the poor performance on certain internal and external factors.

“[Economic] growth lost momentum in the second quarter of 2014 due to the impact of monetary tightening, the delayed effects of macroprudential measures and geopolitical tensions,” Finance Minister Mehmet Şimşek said in a statement after the figures were announced.

Şimşek also warned that an increase in downwards risks were causing the year-end target of 4 percent to become less likely.

“The drought during the summer, the ongoing economic problems in the EU countries, added to geopolitical tensions in Iraq and Ukraine, are raising the risk that [Turkey’s] GDP will remain below the 4 percent level that we foresaw in the Medium Term Plan,” he said.

However, Şimşek also noted that the “recovery from the current global financial condition, a decrease in interest rates and political stability reinforced in the aftermath of [the Aug. 10 Turkish] elections will positively affect domestic demand.”

Markets tumble

Development Minister Cevdet Yılmaz also said Turkey will slightly lower its estimate of 4 percent growth for 2014.

Speaking in an interview with broadcaster NTV, Yılmaz said the 2.1 percent second-quarter growth was lower than that envisaged in Turkey’s medium-term economic plan, and predicted that the year-end figure will be between 3 to 4 percent.

“When we think of both figures, upgraded first-quarter growth and recent second-quarter growth, our performance is not far from estimates for the first half of the year,” he added.

Emphasizing the importance of a stable growth performance at a time when global demand is limited and geopolitical strains occupy the government’s agenda, Yılmaz predicted that Turkey would continue growing economically in the second half of the year.

Meanwhile, the dollar/lira ratio, which has already weakened amid the U.S. dollar’s continuing global rally, tested above the 2.21 level after the announcement of a lower-than-expected growth, the lowest it has been in nearly six months. The lira had begun the week at 2.17, but concerns over the timing of a potential U.S. interest rate hike had weakened the currency up to 2.20 on Sept. 9.