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Turkey’s growth data disappoint – Third quarter 11 décembre 2014

Posted by Acturca in Economy / Economie, Turkey / Turquie.
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Financial Times (USA Ed) December 11, 2014, p. 4

By Daniel Dombey in Ankara

The Turkish economy expanded by an annual rate of 1.7 per cent in the third quarter, marking its lowest rate of growth since 2012.

The disappointing figure was at odds with market expectations for growth of about 2.9 per cent. It is also the latest sign that the Turkish economy is expanding below its historical trend rate of about 5 per cent – necessary to absorb new entrants into the workforce.

Turkey grew by as much as 9 per cent in 2010-11. The government has predicted full-year growth of 3.3 per cent, but after a strong first quarter economic expansion has slowed.

Ali Babacan, Turkey’s deputy prime minister for the economy, and Erdem Basci, central bank governor, blamed the disappointing third-quarter figures on a 5 per cent decline in agricultural production because of bad weather.

Exports rose at an annual pace of 8 per cent, but still failed to compensate fully for the sharp fall in domestic demand prompted by a weaker lira, an interest rate rise and new rules limiting bank lending. In 2013, gross domestic product grew 4.1 per cent.

« There do seem to be some temporary factors, such as agriculture, behind why growth was so much lower than expectations, » said William Jackson, an analyst at Capital Economics. « But even if you were to take these out, growth would still have been very weak, at around 2.5-3 per cent, well below Turkey’s historical average. »

Consumer spending for the quarter remained flat while government spending increased almost 7 per cent.

The International Monetary Fund says Turkey’s economic slowdown is the result of longer-term factors. In a report last week, the IMF argued that « without a change in policies [notably structural reforms, the country’s] medium-term economic performance is likely to be weaker than in the recent past ».

The IMF also warned that the country remained vulnerable to « an abrupt adjustment in the future » because of its reliance on short-term foreign capital to underwrite the current account deficit. It added that the Turkish lira was still overvalued by 10-20 per cent.

« These trends are not sustainable, » it said. Turkish officials argue that the GDP figures are backward looking and that the economy has benefited strongly from the recent slide in the price of oil .

They say the decline will further narrow the current account deficit, boost growth and help to rein in inflation, now about 9 per cent, early in the new year.

Mr Basci said the oil price fall could bring next year’s inflation under 6.2 per cent. But in light of the sluggish domestic demand – historically the motor of the economy – the bank may come under political pressure to slash rates with a general election next year.

« Given the poor inflation outlook, it would be premature and damaging for the central bank’s credibility to cut interest rates, but the politics does make the situation more complex, » said Mr Jackson.

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