Turkey Exits Recession In Q1

Turkey’s economy exited a recession, which was the first in a decade, in the first quarter of the year, driven by spending ahead of the general election.

Gross domestic product advanced 1.3 percent from the fourth quarter, following three quarters of contraction, data from the Turkish Statistical Institute showed Friday.

The economy entered recession in 2018, a year that saw the lira crash and trade tensions with the US rise, amid political pressures on the central bank to keep interest rates low.

GDP shrunk 0.1 percent in the second quarter of 2018, 1.5 percent in the third quarter and 2.4 percent in the final three months of the year.

The return to growth is likely to be short-lived, Jason Tuvey, an economist at Capital Economics, said.

The expansion was driven by pre-election stimulus and the tightening of financial conditions over the past couple of months has probably resulted in a renewed downturn, the economist pointed out.

As a result, Turkey’s economic recovery will be slow and bumpy and it is set to contract by 1.8 percent over 2019 as a whole, Tuvey added.

The full year growth in 2018 was 2.6 percent versus 7.4 percent in 2017.

Year-on-year, the economy contracted 2.6 percent in the first quarter after falling 3 percent in the fourth quarter. GDP decreased by calendar-adjusted 2.3 percent in the first quarter.

On the production side, industry expanded 2.6 percent sequentially as manufacturing rebounded 3.4 percent.

Construction contracted 1.6 percent, but the decline was smaller than the 4.7 percent decrease a quarter ago.

The expenditure-side breakdown of GDP showed that household spending grew only 0.8 percent, while the government expenditure surged 5.1 percent, the biggest gain since the second quarter of 2016.

Gross fixed capital formation decreased 0.7 percent. Exports and imports fell 4.7 percent and 5.5 percent, respectively.

Services output fell by 0.5 percent compared to a 3.3 percent drop in preceding period. Meanwhile, farm output expanded 1.8 percent.

Separate data from the statistical office showed that the trade deficit narrowed to $2.98 billion from $6.7 billion a year ago. Exports increased 4.6 percent, while imports plunged 15.1 percent.

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