Effective measures bring 1.6 percent growth to Turkish economy in Q3

Published 10.12.2018 21:58
Updated 11.12.2018 08:39
Turkey's GDP reached nearly $190 billion at current prices in the third quarter of this year, official data showed.
Turkey's GDP reached nearly $190 billion at current prices in the third quarter of this year, official data showed.

The Turkish economy expanded by 1.6 percent year-on-year in the third quarter of this year. The slowing but positive growth pointed to the launch of a balancing period while featuring the impact of measures taken during the tumultuous summer

The Turkish economy has recorded a positive growth performance in the third quarter of the year despite a turbulent period in the said period, both locally and globally. The Turkish economy grew 1.6 percent year-on-year in the July-August period of this year, the national statistical body announced yesterday. "The positive growth registered in a period when we are experiencing negativity in internal and external conjecture show that the confidence-increasing policy decisions we have taken were effective and that the robust stance of Turkey's economy continued. We see that the balancing process in the economy, which started in the second quarter of this year, evidently continued in the third quarter," Treasury and Finance Minister Berat Albayrak (L) said yesterday at a presentation during budget negotiations in Parliament.

Turkey has ensured a smooth transition during the said hard processes and has shown it can follow a controlled path, Albayrak emphasized, adding that, while final domestic demand made limited contributions in the said period, net foreign demand made a strong contribution to growth due to the strong outlook in exports and tourism revenues and weak imports.

The minister stated that the recent positive developments in financial markets and relative improvements in leading indicators clearly indicate that the growth will follow a sustainable path in the coming period as predicted in the New Economic Program (NEP), which was announced in September, adding that they continue to construct economic policies in a way to increase the competitiveness that is based on innovation and efficiency.

The Turkish economy grew 11.1 percent in the third quarter of last year.

The gross domestic product (GDP) estimate with the production method has increased by 21.8 percent with current prices and reached TL 1.013 trillion ($190 billion) at current prices, Turkish Statistical Institute (TurkStat) said.

The growth marked the slowest quarterly performance since the third quarter of 2016, when the country was shaken by a failed coup attempt on July 15. The country has succeeded to post growth for the eighth consecutive quarter following the coup attempt.

A group of 15 economists surveyed by Anadolu Agency (AA) on Friday had expected the Turkish economy to expand by 1.7 percent in the July-September period. Economists' projections hovered between 0.5 percent and 3 percent.

According to the report, calendar-adjusted GDP in the third quarter increased by 2.1 percent compared to the same quarter of the previous year, while seasonally and calendar-adjusted GDP shrank 1.1 percent compared to the previous quarter.

The figures announced by the institute have also shown that while the total value added by the agricultural sector has increased by 1 percent and that of the industries sector has increased by 0.3 percent in comparison with the same period last year, the value added by the construction sector has decreased by 5.3 percent in the said period.

TurkStat data revealed, in the third quarter of this year, the final consumption expenditures of the state have also increased by 7.5 percent when compared to last year's figures. The fastest growing sector was the services sector at 4.5 percent.

Exports of goods and services were up 13.6 percent, while imports fell 16.7 percent year-on-year in the third quarter.

Compensation of employees increased by 20 percent, while net operating surplus/mixed income grew 22.2 percent quarter-on-quarter.

Revised data showed that the country's economy grew 5.3 percent in the second quarter and 7.2 percent in the first quarter.

The Turkish government aims to reach an economic growth rate of 3.5 percent in 2020 and 5 percent by 2021 under the NEP.

Commenting on the data, economists pointed out that the largest contribution to growth in the third quarter came from net external demand, while domestic demand and the contraction in inventories limited the growth.

AA Finance Analyst and economist Haluk Bürümcekçi noted that the nine-month growth of this year is around 4.5 percent.

"It may be possible to close the year with a growth of 2 to 2.5 percent, as the contraction of 3 to 4 percent in the last quarter seems likely. We expect the growth of next year to be around 1 percent, but downward risks over this forecast also continue," he said.

Halk Invest Research Director Banu Kıvci Tokalı said the financial fluctuations in the summer period and the lagged effects of the monetary tightening steps before the said period showed the expected slowdown in the growth in the third quarter of this year.

She indicated that the first forecasts show that the growth in the last quarter could stay limited. "We maintain our growth forecasts of 3.2 percent for 2018 and 2.0 percent for 2019."

QNB Finansinvest Chief Economist Burak Kanlı stated that the third quarter growth showed a slowdown in economic activity.

"For the first time since the third quarter of 2016, economic activity decreased on a quarterly basis. The data points to a significant contraction in consumption and investment spending. This is partly offset by the contribution of net exports, but another important factor is the serious negative contribution from stocks. This is partly due to improvement in the gold trade, and partly due to the fact that, along with volatility in the exchange rates, the demand for intermediate goods and consumer goods was met by melting stocks," he explained.

Kanlı also noted that in the last quarter, the possibility of both quarterly and year-on-year contraction is high and that he expects the annual growth to be 3.2 percent at the end of the year. "I think that economic activity will continue to be weak in the first quarter of 2019 and then it will enter into a gradual recovery process," he added.

Business world stressed launch of balancing period in economy

Pleased with the growth rate achieved in the Turkish economy in the third quarter, representatives of the business world regard this quarter as the period of "balancing in the economy."

The Turkish Exporters' Association (TİM) Chairman İsmail Gülle stressed the fact that the Turkish economy experienced this quarter as a period of "balancing and discipline" in coordination with the Minister of Treasury and Finance and placed an important mission on exports.

"We are proud of not just the monthly record-high figures achieved in October and November in coordination with TİM and exporters' associations under the auspicious of the Ministry of Trade but also the 1.6 percent growth rate captured by the Turkish economy in the third quarter thanks to net exports making the greatest contribution of the last decade to growth with 6.7 percentage points," Gülle said, noting that figures indicate further contribution from exports to growth in the fourth quarter of the year.

The Turkish Independent Industrialists and Businessmen's Association (MÜSİAD) Chairman Abdurrahman Kaan, on the other hand, stated that the fact that the Turkish economy maintained the growth performance in the third quarter points to the initial fruits of the period of "balancing in the economy."

Kaan pointed out that they are trying to "adjust" the economy with exchange rate shocks in the period covering July, August and September which resulted in a decrease in momentum in economic activity compared to the previous periods, highlighting that they attach importance to growth in the Turkish economy despite attacks against the national economy and perception operations carried out in the process. He also suggested that in the next period, the momentum loss will become more evident, but more solid growth figures will be in question for the Turkish economy which is currently experiencing a balancing period.

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