Türkiye's economy grew by a larger-than-expected 4.5% in 2023, official data showed Thursday, as it expanded by 4.0% in the final quarter of the year with strong domestic demand offsetting the impact of a slowdown in main trading partners and devastating earthquakes that struck country's southeast in February.

The gross domestic product (GDP) with current prices reached $1.12 trillion in 2023, while the GDP per capita was at $13,110, the data from the Turkish Statistical Institute (TurkStat) showed.

In a Reuters poll, the economy was forecast to have expanded 4.3% in 2023, very close to the government's medium-term program forecast of 4.4%. Fourth quarter GDP growth was forecast to be 3.5%. A survey by Anadolu Agency (AA) estimated a 3.97% growth in the last three-month period and an expansion of 4.4% for the whole of 2023.

Commenting on the data Treasury and Finance Minister Mehmet Şimşek noted that the balancing in the composition of the growth observed in the third quarter continued in the last quarter as well, adding that improvement in current account balance continues.

"The Turkish economy grew by 4.5% in 2023, above the Medium Term Program (MTP), exceeding $1.1 trillion. National income per capita increased to $13,110. One-third of the growth in 2023 came from investments in machinery and equipment that increased our productive capacity. In line with our program, the balancing in growth that started in the third quarter of the year continued in the last quarter," Şimşek said in a post on X, formerly Twitter.

"Indicators for 2024 indicate that balancing and improvement in the current account deficit continues. We are moving towards our program goals," he added.

"We have been maintaining our growth performance uninterruptedly for 14 quarters, in an environment where political stability and trust ensure predictability in our economy. The growth achieved in a period when negative geopolitical developments affecting our region were experienced, the wounds of the earthquake were healed, and global commercial activities decreased is showing the strength of our economy," Vice President Cevdet Yılmaz said in a statement on X.

"While we continue to take determined steps to combat inflation in the coordination of monetary and fiscal policy, the capacity of our economy to generate growth through investment, employment, production and exports continues to strengthen."

Gross domestic product expanded 1% in the fourth quarter from the prior three months in seasonally and working-day adjusted terms, the data showed.

The final consumption expenditure of resident households increased by 12.8% in 2023 compared to the previous year's chain-linked volume index. The share of household consumption expenditures in GDP was 59.1%, TurkStat said.

When the activities that constitute gross domestic product were analyzed, the total value added increased by 9.0% in financial and insurance activities, 7.8% in construction, 6.4% in services and 4.6% in other service activities, the data showed. The increase of 3.8% was registered in public administration, while education, human health and social work activities.

The total value added surged 2.7% in real estate activities, 1.3% in information and communication activities, 1.2% in professional, administrative and support service activities and 0.8% in industry respectively. The agriculture sector decreased by 0.2%.

Growth in the third quarter was revised up to 6.1% from 5.9%, the data also showed. The country's GDP growth rate was 4% in the first quarter and 3.9% in the second quarter of last year. The economy grew 5.5% in 2022.

Türkiye at the top of fastest-growing economies

In the last quarter of last year, Türkiye highly outperformed its peers as it emerged as the second fastest-growing economy among the Organisation for Economic Co-operation and Development (OECD) member countries, whose economic growth data was announced on an annual basis.

While Croatia ranked first with 4.3%, Türkiye came in second and was followed by Slovenia, whose economy grew 2.2%.

Among the G-20 countries, the Chinese economy expanded the most as it grew 5.2% on an annual basis in 2023. This country was followed by Indonesia with 5%, while Türkiye ranked third on the list.

World economies mostly contracted last year, with large economies such as Japan and the U.K. tumbling into recessions and Germany broadly stagnating.

The Turkish economy, on the other hand, expanded for 14 consecutive quarters, including the COVID-19 period, which mired the supply chains and disrupted consumption habits worldwide.

Ankara Chamber of Commerce (ATO) Chairperson Gürsel Baran also evaluated the GDP data for 2023 in a written statement, pointing out that the success was achieved while fighting against inflation.

Referring to the growth of other sectors apart from agriculture in 2023, Baran said, "Despite the difficulties experienced in the global economy, the effects of the earthquake disaster, and the process of fighting inflation, the 4.5% growth of the economy in 2023 is an indication that Türkiye's strong and stable structure is preserved."

The pace of growth is expected, however, to slow in the current year, as the effects of tighter monetary policy are anticipated to dampen the demand. Since last June, the Central Bank of the Republic of Türkiye (CBRT) lifted its benchmark one-week repo rate to 45% from 8.5% to tame inflation.