MENA NEWS WATCH : Turkey’s economy grows at record pace after virus contraction

Ahval – Sep 01 2021 – Turkey’s economy grew by a record 21.7 percent annually in the second quarter after posting a contraction at the height of the COVID-19 pandemic last year.

The expansion, which accelerated from 7 percent in the first three months of 2021, matched the average estimate of economists polled by Reuters and the state-run Anadolu news agency.

The Turkish authorities have sought to spur economic growth this year by refraining from hiking interest rates since March and by supporting companies with new lending carrying advantageous repayment terms.

The economy also grew by 0.9 percent quarter-on-quarter, on a calendar and seasonally adjusted basis, the Turkish Statistical Institute said on its website on Wednesday. The rate positive decreased from 1.7 percent in the first quarter.

The overall economy expanded in size to $765.1 billion at the end of June from $729.2 billion three months earlier, the figures showed.

The growth was led by a 22.9 percent annual increase in expenditure by households and a 20.3 percent rise in fixed capital formation. Exports surged by 59.9 percent from a year earlier.

Turkey’s economy expanded at a record pace despite a partial lockdown of the population during the quarter.

Hakan Kara, a former chief economist at Turkey’s central bank, said industrial data for the third quarter signalled strong economic expansion going forward.

“Market estimates for year-end growth are likely to strengthen towards 10 percent,” he said in comments on Twitter.

But economic expansion in Turkey has come at the expense of losses for the lira and faster inflation. The lira has hit successive record lows against the dollar this year, while annual inflation has accelerated to almost 19 percent.

Year-on-year growth was “largely uninteresting because of base effects from last year”, said former Goldman Sachs economist Erik Meyersson.

“The quarter-on-quarter outturn was (marginally) below expectations,” he said. “The problem remains the low quality and lack of sustainability in Turkish GDP growth.”

The lira traded up 0.8 percent at 8.3 per dollar on Wednesday.

(This story was updated with economists’ comments from the eighth paragraph.)