Turkish economy grows at slowest pace in three years

ANKARA / ISTANBUL

Many economists have criticized Turkey's growth policy based heavily on consumer spending and construction, while the contribution of agriculture and industry has gradually declined over the years.

Turkey’s gross domestic product (GDP) has grown 1.7 percent year-on-year in the third quarter, according to official data released Dec. 10, sharply below forecasts that had predicted an increase of around 3 percent.

The economic administration slashed its growth forecast for 2014 from 4 percent to 3.3 percent in October, citing external factors including the chaos in neighboring Syria and Iraq and the increased uncertainty in the global economy. The International Monetary Fund (IMF) has also recently slashed its 2014 growth forecast for Turkey to 2.3 percent.

But the official data announced Dec. 10 showed the biggest drop in Turkey’s quarterly GDP growth in more than two years.

The Turkish Statistical Institute (TÜİK) also revised second-quarter GDP growth to 2.2 percent year-on-year from an initial 2.1 percent and first-quarter GDP growth to 4.8 percent year-on-year from an initial 4.7 percent.

Deputy Prime Minister Ali Babacan and Central Bank Governor Erdem Başçı blamed the lowering agricultural production due to inclement weather for the lower-than-expected third quarter growth rates. Industrial production activities grew by 2.7 percent and the service sector by 3.1 percent in the third quarter, said Babacan in a written statement after the announcement of the growth data.

“Our non-agricultural GDP grew by 2.8 percent in the third quarter of the year from the same period of 2013. The decline in agricultural production because of inclement weather slowed down the economy,” he noted.

Speaking at a news conference to announce the Central Bank’s monetary and exchange rate policy for next year, Başçı also mentioned the negative effect of the decline in agricultural production on the pace of the economy.

Başçı noted the growth had come solely from exports and that the fourth quarter may be slightly stronger, but noted weak European demand and political tensions in Middle Eastern and Russian export markets were challenges.

“Under these circumstances the growth trend is actually good,” he added.

“Geopolitical problems in Turkey’s export markets in the Middle East and weak growth in Europe yet overlapped with an era of weak domestic demand and have weighed on GDP,” he noted.

“These are not the growth rates we want, of course. As the Central Bank we want growth to be faster,” Başçı added.