Turkish economy grows 5.1 percent, ministers upbeat

 11 Sep 2017 - 23:25

Turkish economy grows 5.1 percent, ministers upbeat

By Nevzat Devranoglu & Daren Butler / Reuters

ANKARA:  Turkey’s economy expanded 5.1 percent year-on-year in the second quarter, data showed on Monday, and ministers predicted growth would gain further momentum in the third quarter.

Although just below analysts’ forecasts, the figures are likely to please President Tayyip Erdogan, showing the economy maintained a strong recovery, helped by fiscal stimulus measures after it was hit by an attempted coup in July last year.

The data drove gains in the lira to below 3.4 against the dollar, its strongest this year. The main share index rose 1.2 percent while bond yields were little moved.

“Leading indicators regarding the third quarter show that strong economic growth is continuing and gaining momentum,” Deputy Prime Minister Mehmet Simsek said in a written statement.  Economy Minister Nihat Zeybekci said he expected growth of 5.5 percent in 2017 overall.

Expansion of the state Credit Guarantee Fund had begun to support growth from the second quarter, Simsek said. In March the government increased the size of the fund, which guarantees loans to small and medium-sized enterprises, more than tenfold to 250 billion lira ($70 billion).

Simsek reiterated a government promise to implement a comprehensive reform agenda to accelerate structural change and further boost growth. He did not provide details.

KEEPING MONETARY POLICY TIGHT?

The headline growth number missed a Reuters poll forecast of 5.3 percent, though first quarter growth was revised up to 5.2 percent and 2016 growth to 3.2 percent.

BGC Partners chief economist Ozgur Altug said his firm was raising its 2017 GDP growth forecast to 5.4 percent from 4.7 percent.

Since inflation remained high, “the (GDP) data should encourage the Turkish central bank that it needs to keep its monetary policy tight,” Altug said.

The bank holds its next rate-setting meeting on Thursday.

Mindful of surging consumer prices, the central bank kept key interest rates unchanged at its last two meetings.

Annual inflation was a higher-than-expected 10.68 percent in August, data showed last week.

The economic recovery was staged after the failed putsch on July 15 last year led to a revised contraction of 0.8 percent.  More than 240 people were killed in the attempted coup.

Monday’s Statistics Institute data also showed household consumption expenditure rose 3.2 percent, exports of goods and services climbed 10.5 percent and imports rose 2.3 percent in the second quarter.

Altug said the Credit Guarantee Fund was “the most powerful” tool in the economic revival though a recovering tourism sector had also made a contribution.

(Reporting by Nevzat Devranoglu and Orhan Coskun; Writing by Daren Butler; Editing by Dominic Evans and John Stonestreet)