Turkish economy grows 7.4 percent in 2017, exceeds forecast

ANKARA

The Turkish economy surged 7.4 percent last year, official data showed on March 29, marking its fastest expansion in four years with robust growth in industry, services and construction.

The gross domestic product (GDP) numbers beat a forecast of 7.2 percent growth in a Reuters poll. It was the biggest increase in GDP since 2013.

GDP in the fourth-quarter expanded seasonally and calendar adjusted 1.8 percent from the previous quarter, data from the Turkish Statistical Institute (TÜİK) showed.

On a yearly basis, it increased 7.3 percent.

Third-quarter GDP growth was revised up to 11.3 percent year-on-year from an initial 11.1 percent.

The total value added of services and industry rose by 10.7 percent and 9.2 percent in 2017, respectively, while the construction sector boasted an 8.9 percent rise. The agricultural sector enjoyed a 4.7 percent hike in 2017, compared to 2016, according to TÜİK data.

The strong growth data was praised by top figures of the economy administration.

Incentives, loan guarantees

In a statement on March 29, Deputy Prime Minister Mehmet Şimşek said the Turkish economy was one of the best performing economies among all OECD and G-20 countries as well as compared to the EU members.

“Some key steps we have been taking since the fourth quarter of in 2016 in an effort to support our economy; namely, a series of incentives, which have aimed at increasing investments, production activities, employment and exports and other tools that have facilitated companies’ access to new financing by an enhanced and Treasury-backed Credit Guarantee System, played a key role for Turkey to post such strong growth performance,” he said.

Saying that the 2017 growth was mainly supported by a strong domestic demand, he added the net foreign demand made a limited positive contribution to the growth.

“An 11.7 percent growth in machinery equipment investments in the second half of the year has fueled our future outlook,” Şimşek said, adding that a stronger contribution by the net foreign demand on the economic activity was expected in the upcoming period, mainly driven by a recovery in the European economies and oil-exporting economies and a rebound in the Turkish tourism sector.

Economy Minister Nihat Zeybekci said preliminary indicators signaled a strong 2018 growth as well.

“We can even surpass our 2018 target, which was set as 5.5 percent in the medium-term economic program,” he added.

One of President Recep Tayyip Erdoğan’s senior advisors Hatice Karahan said on Twitter that “sound government policies supported this success along with an improvement in confidence,” adding the focus would now be on reforms.

Household consumption

Final consumption expenditures of households increased by 6.1 percent in 2017 compared to the previous year’s chain linked volume index. The share of household consumption expenditures in GDP was 59.1 percent.

In 2017, the share of government final consumption expenditures in GDP was 14.5 percent, while the share of fixed capital formation was 29.8 percent. According to the previous year’s chain linked volume index, final consumption expenditure by the government increased by 5 percent and gross fixed capital formation by 7.3 percent.

In 2017, exports of goods and services increased by 12 percent, imports increased by 10.3 percent compared to the previous year’s chain-volume index.

Concerns

The strong GDP figure, however, failed to boost the Turkish Lira, which has struggled in recent months on political concerns as well as worrying inflation and current account figures.

The lira was little changed at 4.0090 to the U.S. dollar after the data release, while recovering to 3.96 late on March 29.