The Treasury and Finance Minister Berat Albayrak has said that he expects Turkey to post positive growth for the year, the focus is now shifting to monetary easing following a record cut in interest rates by the central bank in July.
Tuesday 03, September 2019
Turkey’s economy fared better than forecast in the second quarter but growth will likely fall far short of the government’s expectations for the full year, reported Bloomberg.
Gross domestic product expanded a seasonally adjusted 1.2 per cent from the previous three months, down from a revised 1.6 per cent in Q1 2019.
While the risk of a double-dip recession is receding, the government’s 2.3 per cent target for 2019 may be out of reach.
The slowdown in quarterly growth was driven by a slump in investments, which shrank 7.4 per cent from the previous three months.
On an annual basis, business spending on machinery fell 22.8 per cent, the biggest drop since at least 2016 and another factor that contributed to the annual contraction was consumer spending, which shrank 1.1 per cent.
Government spending, usually a big driver of GDP growth, rose 3.3 per cent from year-earlier while exports rose 8.1 per cent.
Turkey exited its first recession in a decade in the first quarter, but the economy has struggled to keep up momentum as the prospect of punitive US sanctions dented consumer and business confidence.
Foreign investors who baulked at the risks pulled their money out and households started hoarding dollars. Meanwhile, the lira suffered the biggest drop in emerging markets in the second quarter, giving way to an outsized draw-down of the central bank’s limited reserves.
The lira has since stabilised and policymakers have started easing access to liquidity—the central bank Governor Murat Uysal slashed the benchmark rate by 425 basis points in July, undoing some of the monetary tightening designed to backstop the currency.