Turkish economic growth rebounds strongly in 2016 with consumption drive, data shows

ANKARA

Turkey’s economy grew a faster-than-expected 3.5 percent in the fourth quarter of 2016, mainly due to a significant rise in consumption, data showed on March 31, bouncing back after last July’s coup attempt and underpinning hopes of a recovery less than three weeks ahead of a referendum. 

The strong growth in the last three months of 2016 followed the first quarterly economic contraction in seven years in the third quarter, when the economy shrank a revised 1.3 percent in the immediate aftermath of the failed putsch. 

Growth in 2016 as a whole was 2.9 percent, according to data from the Turkish Statistical Institute (TÜİK), above the 2.2 percent forecast in a Reuters poll. 

The fourth quarter growth had been expected to be just 2.3 percent. 

A rise in automotive sales in the last quarter ahead of a then-planned tax hike and the acceleration in construction investment made a positive impact over the economic growth, according to analysts. 

“In the first half of 2017, this positive trend will likely continue thanks to a value-added tax (VAT) cut in home appliances and a loan package for Turkish businesses under the ceiling of the Credit Guarantee Fund [KGF],” said Vakıfbank in a note, as quoted by Reuters. 

Household final consumption expenditure increased 5.7 percent in the fourth quarter of 2016 compared with the same quarter of the previous year, TÜİK data showed.

The government final consumption expenditure also saw a 0.8 percent increase. 

“Whether this trend continues in the second half will however be closely followed,” it added. 

“I guess in the end this data shows [the] continued durability of the Turkish economy,” Timothy Ash of BlueBay Asset Management said on Twitter. 

The data comes just over two weeks ahead of an April 16 referendum on constitutional changes. 


Growth ‘despite shocks’

Deputy Prime Minister Mehmet Şimşek said the latest data pointed to moderate growth in the first quarter and an accelerating recovery from the middle of the second quarter. 

“The Turkish economy grew much better than expected in 2016. Recovery was extremely fast in times when we had shocks and coups,” he said in a written statement. 

He added the economic activity will likely speed up after the referendum, when “positive effects of the government’s packages to increase investments, exports and employment will be seen.”

Deputy Prime Minister Nurettin Canikli said that the strong last quarter GDP data was the result of a number of measures to boost domestic and foreign demand and to ease liquidity squeeze in the markets. 

“Turkey will grow higher than 4 percent in 2017,” added Canikli. 
Finance Minister Naci Ağbal was equally optimistic. 

Ağbal said in a statement that growth would accelerate this year on the back of structural reforms, incentives and a positive global outlook.

Economists say Turkey has been too slow to implement reforms to overcome structural weakness in the economy after years of rapid consumption-led growth, including its low savings rate and inflexible labor market.