Turkey’s economy has rebounded from a slump that followed the failed military coup in July 2016 that stoked fears of instability, growing at the fastest rate in the G-20 group of nations.
Gross domestic product rose 7.4 per cent in 2017 powered by consumer and government spending, according to official figures released on March 29. By comparison, China and India grew 6.9 per cent and 7.1 per cent respectively last year.
Fourth-quarter output was up 7.3 per cent year-on-year, but the result marked a dip from the third-quarter growth rate of 11.3 per cent.
Household consumption, which makes up about two-thirds of the economy, rose 6.6 per cent from a year earlier. Public spending on purchases of goods and services was up 7.4 percent. Exports of goods and services expanded 9.3 per cent boosted by strong growth in Europe, while imports grew 22.7 per cent as a government-led credit binge designed to soften the blow from the 2016 coup attempt stimulated domestic demand.
The services industry expanded 10.7 per cent last year, manufacturing was up 9.2 per cent and the construction sector rose 8.9 per cent.
Turkey’s current-account deficit is expected to stay above 5 per cent of GDP this year amid strong domestic demand and higher oil prices. To finance the gap, Ankara relies heavily on short-term flows of money that could quickly evaporate if sentiment towards Turkey changed. The country’s uneasy relationship with the US, its military intervention in Syria and changing global monetary conditions as the US Federal Reserve and the European Central Bank move to normalise monetary policy after years of historically low rates all pose risks.
Inflation is running at 10.26 per cent on a year-on-year basis, according to the Turkish statistical institute. Turkey’s president Recep Tayyip Erdogan maintains pressure on the central bank not to raise interest rates, taking the unconventional view that higher interest rates lead to higher inflation.
Earlier this month, Turkey’s credit rating was cut further into junk by Moody’s Investors Service. The credit rating agency warned of an erosion of checks and balances under the leadership of president Erdogan as well as more risk of external shocks.
photo: ardac / CC BY-NC 2.0
