December 12, 2011
The Turkish economy grew by an better-than-expected 8.2% on the year in the third quarter, according to figures released Monday, December 12 by TurkStat. Turkey’s economy continues to power ahead while others in the region stagnate and contract, but not for much longer.
The market consensus for third-quarter GDP growth had been 6.7%. It was also announced that first-quarter growth had been revised up from 11.6% to 12.0%, while second-quarter growth was 8.8%. This means that in the first nine months of the year, Turkey’s real GDP growth was 9.6%.
The figures show a continuation of Turkey’s impressive economic growth. However, many see this as a last hurrah before an economic slowdown expected next year.
About half of Turkey’s trade is with the EU, which faces a recession that is expected to have a sharp impact on Turkey. Yet some argue that's just what Turkey needs if it's to stabilize an economy that's out of control.
On December 7, the International Monetary Fund projected that growth would slow from 7.5% in 2011 to 2.0% in 2012. It urged the government to adjust its policies to ensure a soft landing. Meanwhile, the IMF sees the current account deficit coming in at about 10% of GDP this year, up from 6.7% in 2010. "More limited foreign financing would constrain the current account deficit to about 8% of gross domestic product and compress imports," according to the IMF.
Turkey’s economy has changed from being seen as a star amid an economic crisis to a liability for stable investment. Exports argue the country must make serious structural reforms to its economy, and the expected slowdown gives the country the opportunity to do just that. "We need many imports for our exports because the value added that Turkish industry appends to products is still very low," businessmen Bulent Eczacibasi, chairman of Istanbul-based Eczacibasi Holding, told local newspaper the Sunday Zaman. "We have to produce and export products with more value added. This is not something you can fix overnight, but the country is on the right path."
The construction sector grew by 10.6% in the third quarter; wholesale trade grew by 9.6%; manufacturing by 8.9%; financial institutions 15.8%; transportation by 9.7%. In November, gold was one of the main financial investment tools in Turkey, according to TurkStat, implying people are starting to worry about inflation, which in November hit 9.48%, far higher that the central bank target for year-end of 5.5%.
Domestically, news of continued growth is being cheered by politicians and the media, and snide comments were being made comparing Turkey's growth to the EU’s woes. The country is second only to China in terms of growth, but the question is now how Turkey will handle the slowdown?