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Turkeys gross domestic product surged 10.3 percent in the second quarter of the year, surprising even the most optimistic economists. The rate matches Chinas as the fastest expansion in the period among the Group of 20 members and pushes Turkeys national output to above $1 trillion for the first time. Robust domestic demand is setting the economys pace, analysts say.
Boosted by private sector investments that flourished at a time of low interest rates, the Turkish economy grew at an annual rate of 10.3 percent in the second quarter, surprising even the most optimistic of economists.
The rate, which matched Chinas as the fastest expansion in the period among Group of 20 members, helped push national economic output above the level it reached before the global crisis hit with full force in late 2008.
The increase comes after 11.7 percent growth in the first quarter. The rate of growth compared to the first quarter is at 3.7 percent after seasonal adjustment.
With this result, Turkey exceeded $1 trillion of gross domestic product in current prices for the first time in its history.
Turkish consumers are driving a recovery from last years 4.7 percent slump, Bloomberg reported after the data was released by the Turkish Statistics Institute, or TurkStat, on Tuesday. Bank loans for cars, homes and other purchases have risen every week since January, and consumer confidence rose to the highest for more than two years in the second quarter.
To ensure that the recovery continues, Central Bank of Turkey Gov. Durmuş Yılmaz has held the benchmark interest rate at 7 percent for the past nine months.
The striking figure is the quarter-on-quarter growth of 3.7 percent. Coming on top of a revised 0.4 percent in the first quarter, that means we are now above [pre-Lehman Brothers bankruptcy] levels, Bloomberg quoted İnan Demir, chief economist for Finansbank in Istanbul, as saying.
Strong link to global conditions
Neil Shearing, a senior emerging markets economist, announced Capital Economics is raising its growth forecast for the full year to 7.5 percent. Growth is likely to slow next year, perhaps to around 4 percent, Shearing said in a report. But a widening current account deficit raises the prospect of a much harder landing should the global economy slow more sharply than we expect.
The growth in key sectors, such as manufacturing and trade tailed off slightly in annual terms, while activity in construction and financial services accelerated, Shearing said.
After adjusting for both seasonal and calendar effects, [the official] estimate is that output rose by a massive 3.7 percent on a quarterly basis in the second quarter, the Capital Economics report said. In other words, the Turkish economy is growing by nearly 15 percent on a quarter-over-quarter annualized basis.
This year is going to be one of strong growth, even if the pace slows to more realistic levels in the second half, Bloomberg quoted Şengül Dağdeviren, chief economist at ING Bank in Istanbul, as saying. Domestic demand is whats setting the pace.
Citigroup, meanwhile, increased its estimate for 2010 economic growth to 7 percent. The forecast was raised from a previous 6.2 percent, Citigroup economist İlker Domaç said in an e-mailed report Tuesday. UBS increased its 2010 and 2011 growth forecasts to 7.3 percent and 4.7 percent, respectively.
There were some favorable base period effects underway herein, given the 11 percent year-on-year real GDP contraction in the first half of 2009, said Timothy Ash, an emerging markets economist at the Royal Bank of Scotland. Reviewing the drivers of growth in Turkey, by expenditure, private consumption posted 6.2 percent growth year-on-year in the second quarter. Government consumption growth was relatively subdued, rising by just 2.3 percent year-on-year in the first half, albeit with growth rising to 3.6 percent year-on-year in the second quarter.
Clearly, the fact that investment remained a key driver for growth in 2010 is encouraging, Ash said in a note to investors. While a range of higher frequency indicators are beginning to suggest that the economy is beginning to slow the size of the first half increase still suggests that for the full year Turkey could post real growth of 6-7 percent, which would put it at the top of the regional growth charts.
Turkey, however, will have to wait some more for an upgrade from credit rating agencies, according to Ash. The government's decision to stall in introducing the new fiscal rule seemed to provide the final nail in the coffin for an early rating upgrade, this side of elections, he said.
Ballot raises optimism
Speaking to reporters in Ankara, State Minister Zafer Çağlayan defined the data as a development that could help set a horizon for Turkey's future. Exports were the locomotive of Turkey's economy, Çağlayan said, adding that Turkey could have grown more were it not for the economic slowdown in European markets.
Çağlayan referred to Sunday's referendum, which resulted in the approval of constitutional amendments by a clear margin, saying that the result raised optimism in markets. "Consumer confidence indices will go up and expectations will be better, which will revive the domestic market and increase growth," Anatolia news agency quoted him as saying.
Economy Minister and Deputy Prime Minister Ali Babacan, meanwhile, said the growth performance owes much to the medium-term program, or OVP, announced Sept. 16 last year. Fiscal policy has a key duty in the following period, he said in a statement. This duty is to create a budgetary structure that would support production, investment and jobs without distorting budget balances.
For the first time in the history of the Republic, Turkey this year borrowed with a maturity of 10 years in the domestic market, Babacan said. This points toward investor confidence in the Turkish Lira and in Turkey in general. The maturity of eurobonds sold abroad has surpassed 30 years. The interest rate on such bonds is lower than the rates on bonds from sovereigns that have higher credit ratings than Turkey.
In the first six months of the year, total capital inflows into the economy reached $20.1 billion, excluding bank reserves, Babacan noted.
Industry and Trade Minister Nihat Ergün predicted an annual growth rate of around 7 percent this year. Ergün recalled that the medium-term program had a target of 3.5 percent. Turkeys credit rating will be further upgraded, he said. This will increase both domestic and foreign investment, which will contribute highly to economic growth and a rise in employment.
Still, Capital Economics Shearing was cautious for the future. We think that there are good reasons to treat official estimates of quarterly growth with caution, he said. After all, TurkStat estimated that the economy expanded by a paltry 0.4 percent on a quarterly basis in the first quarter. More generally, Turkish GDP data are notoriously volatile and as such we would put little weight on changes from one quarter to the next.
Boosted by private sector investments that flourished at a time of low interest rates, the Turkish economy grew at an annual rate of 10.3 percent in the second quarter, surprising even the most optimistic of economists.
The rate, which matched Chinas as the fastest expansion in the period among Group of 20 members, helped push national economic output above the level it reached before the global crisis hit with full force in late 2008.
The increase comes after 11.7 percent growth in the first quarter. The rate of growth compared to the first quarter is at 3.7 percent after seasonal adjustment.
With this result, Turkey exceeded $1 trillion of gross domestic product in current prices for the first time in its history.
Turkish consumers are driving a recovery from last years 4.7 percent slump, Bloomberg reported after the data was released by the Turkish Statistics Institute, or TurkStat, on Tuesday. Bank loans for cars, homes and other purchases have risen every week since January, and consumer confidence rose to the highest for more than two years in the second quarter.
To ensure that the recovery continues, Central Bank of Turkey Gov. Durmuş Yılmaz has held the benchmark interest rate at 7 percent for the past nine months.
The striking figure is the quarter-on-quarter growth of 3.7 percent. Coming on top of a revised 0.4 percent in the first quarter, that means we are now above [pre-Lehman Brothers bankruptcy] levels, Bloomberg quoted İnan Demir, chief economist for Finansbank in Istanbul, as saying.
Strong link to global conditions
Neil Shearing, a senior emerging markets economist, announced Capital Economics is raising its growth forecast for the full year to 7.5 percent. Growth is likely to slow next year, perhaps to around 4 percent, Shearing said in a report. But a widening current account deficit raises the prospect of a much harder landing should the global economy slow more sharply than we expect.
The growth in key sectors, such as manufacturing and trade tailed off slightly in annual terms, while activity in construction and financial services accelerated, Shearing said.
After adjusting for both seasonal and calendar effects, [the official] estimate is that output rose by a massive 3.7 percent on a quarterly basis in the second quarter, the Capital Economics report said. In other words, the Turkish economy is growing by nearly 15 percent on a quarter-over-quarter annualized basis.
This year is going to be one of strong growth, even if the pace slows to more realistic levels in the second half, Bloomberg quoted Şengül Dağdeviren, chief economist at ING Bank in Istanbul, as saying. Domestic demand is whats setting the pace.
Citigroup, meanwhile, increased its estimate for 2010 economic growth to 7 percent. The forecast was raised from a previous 6.2 percent, Citigroup economist İlker Domaç said in an e-mailed report Tuesday. UBS increased its 2010 and 2011 growth forecasts to 7.3 percent and 4.7 percent, respectively.
There were some favorable base period effects underway herein, given the 11 percent year-on-year real GDP contraction in the first half of 2009, said Timothy Ash, an emerging markets economist at the Royal Bank of Scotland. Reviewing the drivers of growth in Turkey, by expenditure, private consumption posted 6.2 percent growth year-on-year in the second quarter. Government consumption growth was relatively subdued, rising by just 2.3 percent year-on-year in the first half, albeit with growth rising to 3.6 percent year-on-year in the second quarter.
Clearly, the fact that investment remained a key driver for growth in 2010 is encouraging, Ash said in a note to investors. While a range of higher frequency indicators are beginning to suggest that the economy is beginning to slow the size of the first half increase still suggests that for the full year Turkey could post real growth of 6-7 percent, which would put it at the top of the regional growth charts.
Turkey, however, will have to wait some more for an upgrade from credit rating agencies, according to Ash. The government's decision to stall in introducing the new fiscal rule seemed to provide the final nail in the coffin for an early rating upgrade, this side of elections, he said.
Ballot raises optimism
Speaking to reporters in Ankara, State Minister Zafer Çağlayan defined the data as a development that could help set a horizon for Turkey's future. Exports were the locomotive of Turkey's economy, Çağlayan said, adding that Turkey could have grown more were it not for the economic slowdown in European markets.
Çağlayan referred to Sunday's referendum, which resulted in the approval of constitutional amendments by a clear margin, saying that the result raised optimism in markets. "Consumer confidence indices will go up and expectations will be better, which will revive the domestic market and increase growth," Anatolia news agency quoted him as saying.
Economy Minister and Deputy Prime Minister Ali Babacan, meanwhile, said the growth performance owes much to the medium-term program, or OVP, announced Sept. 16 last year. Fiscal policy has a key duty in the following period, he said in a statement. This duty is to create a budgetary structure that would support production, investment and jobs without distorting budget balances.
For the first time in the history of the Republic, Turkey this year borrowed with a maturity of 10 years in the domestic market, Babacan said. This points toward investor confidence in the Turkish Lira and in Turkey in general. The maturity of eurobonds sold abroad has surpassed 30 years. The interest rate on such bonds is lower than the rates on bonds from sovereigns that have higher credit ratings than Turkey.
In the first six months of the year, total capital inflows into the economy reached $20.1 billion, excluding bank reserves, Babacan noted.
Industry and Trade Minister Nihat Ergün predicted an annual growth rate of around 7 percent this year. Ergün recalled that the medium-term program had a target of 3.5 percent. Turkeys credit rating will be further upgraded, he said. This will increase both domestic and foreign investment, which will contribute highly to economic growth and a rise in employment.
Still, Capital Economics Shearing was cautious for the future. We think that there are good reasons to treat official estimates of quarterly growth with caution, he said. After all, TurkStat estimated that the economy expanded by a paltry 0.4 percent on a quarterly basis in the first quarter. More generally, Turkish GDP data are notoriously volatile and as such we would put little weight on changes from one quarter to the next.
