Turkey's GDP expected to grow 4.5 pct in Q1

Published 07.06.2016 00:23

Turkey's gross domestic product (GDP) is expected to grow by 4.5 percent for the first quarter of 2016 and by 3.6 percent throughout the year. On June 10, Turkish Statistical Institute (TurkStat) will announce GDP data for the first quarter of the year and GDP expectations for the entirety of the year. The GDP is expected to grow by 4.5 percent on a median basis due to the contribution of domestic demand in the first quarter of 2016. Year-end inflation is expected to grow by 3.6 percent due to risks, with the troubles facing the tourism sector taking the lead.

Economists suggest that political risks, slowdown in capital inflows due to the U.S. Federal Reserve's (Fed) interest rate hikes and the continuation of the rise in oil prices can pose risks to the growth in the rest of the year. According to a survey Reuters conducted with 20 economists, growth expectations vary between 3.7 percent and 5.3 percent for the first quarter and between 3 percent and 4 percent for the end of the year.

Growth expectations for 2016 stood at 4.5 percent in the government's Medium-Term Program (MTP) for the period between 2016 and 2018, because of fall in political uncertainties, rise in private sector investments, invigoration of domestic demand through income policies and increase in foreign demand.

Şakir Turan, an economist at Odeabank, said household domestic consumption had slightly declined during the first quarter, however it maintained its strength and would continue to make the greatest contribution to growth. He added, "In addition to consumption and the gradual recovery of public expenditures and private sector investments, it is seen that the growth continues with the support of domestic demand in the first quarter. We calculate that net foreign demand has reduced the growth by around one point."

Stressing that the existing risks will restrict growth in the upcoming months, Turan said uncertainties stemming from the questions of how much problems facing the tourism sector will intensify, and how far employment and household consumption will decelerate, are downward risks for growth.

Last year, growth in the Turkish economy stood at 2.5 percent in the first quarter, and 3.7 percent in the second quarter. Although growth weakened before the Nov. 1 elections, it was actualized at 3.9 percent in the third quarter through strong domestic demand and manufacturers' move toward stockpiling. It grew by 4 percent throughout last year. Thanks to the support of export-based sectors, industrial production, which is one of the most important leading indicators of growth, roughly increased by 4.7 percent in March and 5.6 percent in the first quarter, signaling that the growth will remain strong.

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