Turkey grows 4.3 percent in first quarter, fueling year-end hopes
According to calculations made by bankers who used TÜİK data, growth has been pulled by 2.7 points mainly due to net exports, 2.1 points by domestic consumption, 0.9 points by government consumption spending and 0.2 points by government investments. DAILY NEWS PhotoThe Turkish economy grew 4.3 percent in the first quarter of 2014, mainly due to strong exports that benefited from a weak Turkish Lira in a period marked by a fragile domestic market, high interest rates and a tense political environment.
The gross-domestic product (GDP) rose to 29.2 billion liras between January and March after rising by 4.3 percent compared to the same period last year, the Turkish Statistical Institute (TÜİK) announced on June 10. Analysts had predicted that growth would be hovering at around 4 percent.
The first-quarter growth has been mainly shouldered by exports that rose over 11 percent compared to the same period last year.
Government spending was another important driver of the firmer-than-expected figures. As shown by the TÜİK data, public sector expenditures soared ahead of the March 30 local elections, increasing by 8.6 percent compared to the same month last year.
According to calculations made by bankers who used TÜİK data, growth has been pulled by 2.7 points mainly due to net exports, 2.1 points by domestic consumption, 0.9 points by government consumption spending and 0.2 points by government investments. While private sector investments pulled it down by 0.3 points and inventory variation by 1.2 points.
The government’s economy agencies welcomed the data, interpreting it as a sign that the growth target for the end of the year will be achieved despite looming downward risks.
Ali Babacan, deputy prime minister in charge of economic affairs, said internal and external demand entered a balancing process during the first quarter with macro-prudential measures being introduced at the beginning of year.
With the aim of raising the domestic savings rate and reducing the nation’s dependence on foreign capital to finance consumption, the Banking Regulation and Supervision Agency (BRSA) put hikes on the down payments for car loans in February.
Babacan praised the regulation for shifting the center of growth from the domestic market to the external market.
He also said first quarter growth as well as second quarter confidence indexes and economic data is compatible with the year-end growth forecast of 4 percent.
“The economic activity’s strong course, despite moderate domestic demand, is a result of confidence and stability created in the markets with implemented policies,” the deputy prime minister also added.
In a separate statement released after the announcement of the GDP figures, Finance Minister Mehmet Şimşek also expressed confidence in reaching year-end targets, citing strong foreign conditions.
“The economy grew above expectations in the first quarter, despite the rise in the political risk premium, monetary tightening and the introduction of macro-prudential measures,” Şimşek said.
Despite downside factors squeezing domestic demand, he added, “The recovery in our biggest trade partner the EU and competitive currency level, affected foreign demand positively.”
Şimşek also suggested recovery in European and the U.S. economies, as well as the European Central Bank’s recent interest rate cut, will further support the upturn in external demand conditions.
Meanwhile, Economy Minister Nihat Zeybekci, took the growth figure as proof of the “government’s success,” adding he foresees second quarter data to come in at around this level.