Turkey’s Economy Achieves 8,9 Percent Growth
Turkey’s economy registered a higher-than-expected growth rate of 8.9 percent in 2010 over 2009, surpassing a government growth target of 6.8 percent in the medium-term program, amid the risk of a sharply widening current account deficit (CAD).
The latest figures send a strong signal about the country’s resilience against external shocks amid uncertainties that still linger in global markets. However, observers caution that fast growth in the Turkish economy “must be manageable” in the face of a growing CAD. In this respect, the Central Bank of Turkey is being called upon to maintain its strategy of using a policy mix that comprises low policy rates and high reserve requirements to balance domestic and foreign demands and financial stability. Experts have warned that the management of the economy should not overlook the fact that such high growth traditionally brings about a huge CAD in Turkey. Turkey’s current account deficit in 2010 increased by 247.1 percent, approaching $48.6 billion, $9.5 billion above government estimates.
The Turkish Statistics Institute (TurkStat) announced on Thursday that Turkey’s gross domestic product (GDP) managed to grow by 8.9 percent last year over 2009. The GDP grew to TL 1.1 trillion (or $735.8 billion) in current prices. Earlier, market expectations for the year-end growth rate stood between 7 and 8 percent. The economy is expected to register a growth rate of around 4.5 percent in the coming year.
The TurkStat figures also showed Turkey’s GDP recorded a growth rate of 9.2 percent in the final quarter in constant prices compared to the same period a year ago. The growth estimate for the final quarter was around 7.3 percent. TurkStat’s release on Thursday, calculated by the production method, showed that the GDP rose in current prices by 17.3 percent in the final quarter to TL 298.29 billion. This is the fifth quarter in a row that the Turkish economy has recorded growth.
Meanwhile, the GDP per capita increased to TL 15,138 ($10,079) last year. Evaluating the results in Ankara on Thursday, Economy Minister Ali Babacan said Turkey was one of the few countries to record the highest growth rates thanks to timely measures.
The Turkish economy suffered 4.8 percent stagnation in 2009, when a global financial turbulence ravaged world economies, over the preceding year. Thanks to strict adherence to a disciplined monetary policy, timely measures taken by the central bank and intensive investments from the private sector, the economy was able to bounce back faster than foreseen from the 2009 crisis.
Following the ebb in growth rates in 2009, the economy posted double-digit growth rates with 12 percent and 10.3 percent, respectively in the first two quarters of last year. It expanded by 5.2 percent in the third quarter of last year over the same period a year before.
It has been the policy of the central bank to curb “hot money” inflows increasing banks’ lira reserve requirements and reducing the policy rate as they see a speedy growth in the economy as the major reason for an increase in Turkey’s CAD. Therefore, the bank is also trying to restrain domestic demand by slowing credit growth.
According to Oyak Yatırım economist Gülay Elif Girgin, the bank is expected to continue “cooling down” domestic markets” unless domestic consumption and bank loans drop in the months to come. ING Bank Chief Economist Sengül Dağdeviren argues that prevailing risk concerns could undermine the positive impact of last year’s higher-than-expected growth in markets to some extent. Emphasizing that the latest indices are proof a domestic output deficit saw a swift decline last year, Dağdeviren joins Girgin that the central bank will continue taking measures.
“Very strong figures” was how Timothy Ash from the Royal Bank of Scotland described the latest growth indices provided by TurkStat. Noting that Turkey led European countries in terms of economic growth last year, he said the central bank would continue taking measures to restrain domestic demand. Ash underlined that Turkey’s output deficit was minimized to a considerable extent last year. Finansbank Chief Economist Cevdet Çağdaş Ünal said the results justify the Turkish central bank’s maneuvers to slow down growth in economy.
Riding the crest of a private investment boom
If there were one single actor that should be given credit for Turkey’s impressive growth last year, that would be the country’s private industry. The private sector spent some TL 164.3 billion on new investments last year. Thursday’s TurkStat data finds 91 percent of the country’s 8.9 percent annual growth in 2010 was led by private investments and domestic consumption — 54 percent and 47 percent, respectively. Public investments had only a minor impact on this notable growth by only 8 percent relatively. While the state remained reluctant to inject huge amounts of cash to new investments, the private investments in Turkey increased by 49.5 percent in the last quarter of 2010 over the same period in 2009 and by 33.5 percent per annum last year.
Construction cements high growth in economy
The construction sector was by far the leading industry to drive exceptional growth in the economy last year. Other sectors that contributed to the high growth in economy were trade and transportation. Following 16.1 percent stagnation in 2009 over 2008, Turkey’s construction sector displayed an impressive comeback last year and enjoyed a 17.1 percent growth over 2009. This was followed by 14.2 percent in fishery and 13.6 in manufacturing industries in the same period. The retail industry enjoyed a 13.3 percent growth in 2010 over a year before. The transportation and communication industries both enjoyed 10.5 percent growth in the same period.
While some EU-member states are still scrambling to shake off the shackles of a 2009 crisis, Turkey has outdistanced economies of the EU to become the fastest growing economy in Europe.
01 April 2011
SOURCE: TODAYS ZAMAN
