Turkish growth beats forecast, political turmoil clouds outlook
istanbul —Turkey’s economy grew a larger-than-expected 2.3 per cent year-on-year in the first quarter, data showed on Wednesday, but analysts saw an uncertain outlook after a weekend election that left the country facing the prospect of a coalition government. The growth rate clearly exceeded a
poll forecast of 1.6 per cent, triggering moderate gains in shares and the lira , which has fallen 15 per cent against the dollar this year.
Annual growth was still down from 2.6 per cent in the fourth quarter, well below the government’s targets, and analysts played down the positive significance of the data.
“This stronger outturn was caused by a sharp pick-up in consumer spending, which came at the cost of a lower domestic savings rate and a wider current account deficit,” said Capital Economics senior emerging markets economist William Jackson.
“None of this looks sustainable and we think growth will be weak over the coming quarters,” he said in a note.
But Finance Minister Mehmet Simsek said the growth was positive given stagnation in Europe, geopolitical tensions, financial volatility and political uncertainty.
“Leading indicators show growth has accelerated in the second quarter. The Turkish economy’s fundamentals are sound. Political uncertainty should not last long,” he wrote on Twitter.
Deputy Prime Minister Ali Babacan said he expected external demand to contribute to growth.
The ruling AK Party lost its parliamentary majority in Sunday’s vote, ending more than a decade of single-party rule and plunging Turkey into uncertainty not seen since the 1990s. The prospect of a coalition fuelled uncertainty about the makeup of the next economic team.
The outcome also chastened President Tayyip Erdogan, frustrating for now his plans to boost his powers, and it was unclear if he would resume his long-running pressure on the central bank to ease monetary policy to boost flagging growth.
Output grew 1.3 per cent from the previous quarter on a seasonal and calendar-adjusted basis, the Turkish Statistics Institute said. Gross domestic product (GDP) expanded 2.9 per cent last year.
The growth was still well below the levels sought by the ruling AK Party, which has had a solid record on the economy since first coming to power in 2002.
According to the Reuters poll, the economy is forecast to grow 3.05 per cent this year as a whole, below a target of four per cent in the government’s medium-term programme.
The lira was at 2.7370 to the dollar, firming from 2.757 late on Tuesday. The benchmark 10-year bond yield fell to 9.54 from 9.72 per cent on Tuesday.
The main Istanbul share index rose 1.3 percent.
Household consumption rose 4.5 per cent year-on-year in the first quarter, offsetting a slight decline in exports, reflecting factors including the recession in Russia and bad weather, Jackson said, forecasting full-year growth of 2.5 per cent.
Recent data has painted a mixed picture on the economy. Industrial production grew a better-than-expected 3.8 per cent in April but trade ministry data on Tuesday showed exports tumbling 18 per cent and imports dropping 14 per cent in May.
rise in output in first quarter from previous quarter