Turkey braces for alarming contraction

Bloomberg

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Gross domestic product fell an annual 5.4 percent after a 0.5 percent gain in the previous three months, according to the median estimate of 13 economists surveyed by Bloomberg. The statistics office will release the figures in Ankara at 10 a.m. today.

The contraction has driven unemployment to a record and prompted the government to seek financial support from the International Monetary Fund as tax revenue tumbles. The Central Bank has lopped 6.25 percentage points from its benchmark interest rate over the last five months reducing it to 10.5 percent in a bid to minimize recession.

"Growth indicators are truly disconcerting," Reinhard Cluse, an economist with UBS said in an e-mailed report on March 26. "Following a likely contraction of 5 percent in the fourth quarter, GDP might have dropped by around 10 percent or more in the first quarter of 2009."

Industrial production fell an average of 12.6 percent in the fourth quarter and slumped 21.3 percent in January, the biggest contraction since the statistics agency began releasing figures in 1986. The jobless rate surged to 13.6 percent in the three months through January.

The statistics agency will also release foreign trade figures for February today at 5 p.m. Exports fell 25.7 percent in January, the most since September 1986, as European demand for Turkish-made cars and ovens slumped.

Tofaş, Fiat’s Turkish unit, halted production in December as orders fell. Sönmez Filament, a fiber and yarn producer, said Nov. 6 it was stopping output indefinitely and firing all but "essential" staff as the financial crisis hit demand.

The statistics agency will release inflation data for March on April 3. The central bank said on March 19 that while food prices may cause an increase in the March inflation rate, the slowing economy means the trend remains down.