Turkish economic growth shows strong recovery in second quarter

ANKARA/ISTANBUL

The Turkish economy expanded 5.1 percent year-on-year in the second quarter of the year, official data showed on Sept. 11, showing a strong recovery in investments and exports, helped by the government’s fiscal stimulus measures after growth was hit last year by an attempted coup.

First quarter growth was also revised up to 5.2 percent from an initially reported 5 percent, while 2016 growth was revised up to 3.2 percent from an initial 2.9 percent. 

Growth was driven by all main sectors in the second quarter, with the agricultural sector expanding by 4.7 percent, the manufacturing industry by 6.3 percent, the construction sector by 6.8 percent and the services sector by 5.7 percent, the Turkish Statistics Institute (TÜİK) said in a statement. 

“Leading indicators regarding the third quarter show that strong economic growth is continuing and gaining momentum,” Deputy Prime Minister Mehmet Şimşek said in a written statement following the data.

Expansion of the state Credit Guarantee Fund (KGF) had begun to support growth from the second quarter, he also said. 

In March the government increased the size of the fund, which guarantees loans to small and medium-sized enterprises, more than tenfold to 250 billion liras ($70 billion). 

“While domestic demand made a 3.2 percent contribution to the GDP growth, the contribution of the net foreign demand was 1.8 percent. Preliminary indicators have also showed that the economic growth would continue in the third quarter as well,” Şimşek noted, adding that a strong growth was positive but not enough by itself.

“Our main priority is to maintain an inclusive growth,” he said. 

While household final consumption expenditure increased by 3.2 percent, the government final consumption expenditure decreased by 4.3 percent, according to TÜİK data. 

The gross fixed capital formation increased by 9.5 percent in the second quarter of 2017 compared with the same quarter of the previous year in the chained linked volume index.

Exports of goods and services also increased by 10.5 percent and imports of goods and services increased by 2.3 percent in the second quarter of 2017 compared with the same quarter of the previous year. 

In a statement, Finance Minister Naci Ağbal said the government’s measures and incentives showed a strong impact over the second quarter growth data.
 
“A visible recovery in tourism figures and exports will likely trigger economic growth in the third quarter with a base effect,” he said. 

Strong rebound in investments, exports

The government is penciling in overall economic growth of 4.4 percent for the whole of 2017 and Prime Minister Binali Yıldırım said at the weekend that the target would likely be exceeded.

In a statement, Economy Minister Nihat Zeybekci said some 1.98 percent of the 5.1 percent of growth in the second quarter came from exports. 

“What is more, the contribution of investments was 2.86 percent over the GDP growth. Thus, both investments and exports constituted 3.9 points of the 5.1 percent GDP growth,” he said, adding that the GDP would likely grow 7 percent in the third quarter. 

“I believe that Turkey would close this year at a 5.5 percent growth rate, higher than a 4.4 percent government target for 2017,” Zeybekci added.