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Growth up in second quarter, current account gap widens

HDN | 9/12/2011 12:00:00 AM |

Turkish gross domestic production posted 8.8 percent growth in the second quarter of the year, according to official data, thus being the world’s second fastest growing economy after China. The country’s current account deficit, however, continued widening in July, recording a deficit of $5.3 billion, Central Bank data show

Turkey’s gross domestic product grew 8.8 percent in the year’s second quarter, compared to the same period last year, according to data published by Turkey’s statistics agency, TurkStat. Meanwhile, the current account deficit recovered to $5.3 billion in July, from $7 billion a month earlier, data published Monday by Turkey’s Central Bank showed.

The country’s GDP growth performed above the market consensus of 6.8 percent, reaching a level of 318.4 billion Turkish Liras in the first quarter, with seasonally adjusted GDP increasing by 1.3 percent compared to the first quarter of 2011, data showed.

Turkey was the world’s second fastest growing country in the second half, following China and the 9.5 percent growth of its gross domestic product, according to an Anatolia news agency report on Monday. On the other hand, Turkey was Europe’s fastest growing economy for the same period.

TurkStat data showed Turkey’s economy has grown by 10.2 percent in the first half of 2011. “The figures calm fears of a recession, however, they do not fully remove fears of overheating [for the Turkish economy],” Elisabeth Andreew of Nordea said in a note sent to investors on Monday.

“Turkey’s economic growth is not inestimatable, uncontrolled. The main source of growth is the private sector. We tell people to spend as much as they earn,” Industry Minister Nihat Ergün said in a Monday interview on NTVMSNBC television channel, commenting on the growth figures.

Growth in GDP, however, accelerated in the year’s second quarter, compared with the first quarter. “We expect this trend to continue in the third quarter as well,” Akbank wrote in a note on Monday, adding that such expectations were also backed by the slowdown in July’s loan growth.

The wholesale and retail trade and construction sectors grew by 13.2 and 13 percent respectively. The financial intermediation sector increased by 14.3 percent in the second quarter. Other fast growing sectors were transportation with 11.7 percent and agriculture with 6 percent. Mining grew the slowest at 1.2 percent, but there were no contracting sectors for the second quarter of the year.

Private domestic household consumption increased by 9.2 percent in the second half, compared to the same period last year. Meanwhile, capital formation posted a 28.9 percent rise, with private sector capital growing 33.5 percent and the public sector growing only 6.6 percent.

The Turkish government expects GDP in 2011 to be around 7 percent. Turkey’s economic growth is an indicator of the country’s dynamism, Economy Minister Zafer Çağlayan said, according to a written statement published by the ministry on Monday.

TurkStat also revised the GDP growth rate for the first quarter of 2011 up to 11.6 percent from 11 percent and 2010’s GDP growth rate to 9 percent from 8.9 percent.

Meanwhile, Turkey’s current account balance in July recorded a deficit of $5.3 billion compared to $7 billion a month earlier, according to data published by the Turkish Central Bank on Monday. The deficit thus recorded a 50 percent increase in July 2011, compared to the same month last year.

The country’s current account deficit reached $50.7 billion during the period between January and July 2011, recording an increase of 113 percent compared with the same period last year.

The foreign trade gap, which amounted to $7.95 billion in July, was the key contributor to the deficit. Meanwhile, tourism revenues were the key financing source for the current account deficit, reaching $2.8 billion in July - a 27 percent monthly increase. Foreign direct investment entering the country in July was $2.6 billion. The “Net Errors & Omissions” item amounted to $1.4 billion in July and totaled $10.6 billion in the first seven months. This is the highest level recorded in Turkish history.

“The deterioration momentum in the current account deficit started to slowdown, however, worsening continues. We expect to see a further slowdown in the deterioration speed in August. A reversal in the trend could start in November,” Özgür Altuğ of BGC Partners said in a note to investors on Monday.

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