Turkish economic growth jumps to 11.1 pct, hitting highest quarterly growth since 2011

ANKARA / ISTANBUL

Turkey’s gross domestic product grew at a blistering 11.1 percent in the third quarter, hitting its fastest expansion in six years, data from the Turkish Statistics Institute (TÜİK) showed on Dec. 11.

The GDP growth rate, which was the fastest quarterly data since an 11.6 percent in the third quarter of 2011, was above forecasts and made Turkey the world’s fastest growing economy.

The growth rate is believed to have been encouraged by a series of government incentives and the low base effect after last year’s failed coup attempt. Following the coup attempt, which led to a 0.8 percent contraction in the third quarter, the government ramped up its stimulus measures including the use of its Credit Guarantee Fund and changes to tax regulation.

Meanwhile, second-quarter growth was revised up to 5.4 percent from an initially reported 5.1 percent, while first-quarter growth was also slightly revised up, to 5.3 percent.

Performance in the third quarter pushed up cumulative GDP, reaching 827.2 billion Turkish Liras ($216 billion) in current prices, with GDP annualized at $844 billion, TÜİK data showed.

When the activities that constitute gross domestic product were analyzed, the total value added increased by 2.8 percent in the agricultural sector, 14.8 percent in the industry sector, 18.7 percent in the construction sector and 20.7 percent in the services compared with the same quarter of the previous year.

The growth was triggered mainly by domestic demand as well as accelerated investment support by the government and strong contributions from exports, according to TÜİK data.

Final consumption expenditure by resident households grew 11.7 percent in the third quarter from a year earlier. Government spending on wages and purchases of goods and services rose 2.8 percent and gross fixed capital formation increased 12.4 percent in the third quarter of 2017 compared with the same quarter of the previous year in the linked volume index.

Exports of goods and services increased by 17.2 percent and imports of goods and services increased 14.5 percent in the third quarter from a year earlier.

Annual growth ‘may hit 7 percent’

Economic indicators currently signal a higher than 6.5 percent annual growth, Deputy Prime Minister Mehmet Şimşek said on Dec. 11, after the TÜİK data was announced.

Speaking to broadcaster TRT Haber, Şimşek said the Credit Guarantee Fund support was quite visible in the economic growth, as proved by the 15.3 percent expansion in machinery and equipment investments.

A decrease in the contribution of foreign demand to economic growth was the only negative development regarding third quarter data, he added.

“Turkey’s economic growth is quite strong but we must make more reforms to foster job growth and make GDP growth steadier,” he said.

The Credit Guarantee Fund guarantees loans to small and medium-sized enterprises that could not otherwise get credit. It has backed some 221 billion liras ($57.39 billion) worth of loans so far, after its size was increased more than ten-fold to 250 billion liras in March.

Development Minister Lütfi Elvan said full-year growth was expected to be between 6 and 7 percent.

“Turkey’s economy has grown at record high levels, with Turkey becoming the world’s fastest growing economy. The fourth quarter data also seems good and we expect to see a high growth level in that quarter to,” Elvan told private broadcaster A Haber.

“Turkey’s annual growth may even hit 7 percent this year,” he added.

New measures ‘underway’

Economy Minister Nihat Zeybekçi said 7 percent growth for the year would not be surprising, while also signaling new measures.

“It will not be surprising for us if growth hits 7 percent in 2017,” Zeybekci said during a televised interview on BloombergHT.

“We will see a nearly 100 percent rebound in private sector investments in 2018 thanks to a series of new measures, which will be announced this month,” he added.