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Turkey’s economy powered ahead in the third quarter, with gross domestic product 11.1 per cent higher than in the same period in 2016, exceeding analysts’ expectations.
The pace of growth reported by the government statistics office on Monday was up from an average of 5 per cent during the previous three quarters. The country is on track to deliver GDP growth of as much as 7 per cent for the whole of 2017, about twice the amount expected earlier in the year.
“This is a robust recovery from the difficult year of 2016 and shows the resilience of the Turkish economy,” said Hatice Karahan, chief economic adviser to President Recep Tayyip Erdogan.
“This is the second time since the global financial crisis that Turkey has demonstrated its resilience,” she told the Financial Times.
Growth in the third quarter was especially strong in annual terms because of the comparison with the third quarter of 2016, when the economy contracted by 0.8 per cent in the aftermath of a failed coup attempt in July 2016.
Nevertheless, the average pace for the past 12 months has risen to 6.5 per cent, driven primarily by household consumption and by a revival in investment.
“Investment is coming back, that is the best news from this period,” said Ms Karahan. She said investment contributed 3.6 percentage points to growth on the demand side, while household consumption contributed 7 points. Exports also grew strongly but so did imports, with the result that the net contribution of exports to growth was minimal, she said.
Despite the strong third-quarter figures, many economists raised questions about the sustainability of Turkey’s growth.
Atilla Yesilada of GlobalSource Partners, a consultancy, said private sector investment had risen from a very low base. “It is increasing because the capital stock has become so depleted,” he said. “It’s an improvement but we can’t say that business has got over the state of emergency” imposed after the coup.
Some executives and analysts have argued that the state of emergency — during which the government has seized at least $11bn of assets from businesses and which is still in force — has stoked uncertainty and rattled investors.
Inan Demir at Nomura, an investment bank, said the composition of growth remained “very unbalanced”.
“Growth is being driven by credit,” he said. “Credit growth is so strong that it is pushing domestic demand higher. That’s the big imbalance in the economy.”
The government has supported demand this year through a credit guarantee fund for small and medium-sized companies, giving government backing to up to TL250bn ($65bn) of loans.
Ms Karahan said only a “small amount” of the total remained to be used, but that the scheme would continue as previous loans were repaid.
She added that the government was planning additional incentives for investment in “strategic and selected” sectors that would provide growth and employment while reducing Turkey’s dependence on imported energy, such as the petrochemicals industry, defence and renewable energy.
She said such incentives formed part of a medium to long term reform agenda that would be presented in more detail early in 2018.
She said investment in renewables would be a big part of efforts to reduce Turkey’s current account deficit, which expanded to 4.7 per cent of GDP at the end of September, from about 3.4 per cent of GDP at the beginning of last year.
“This is a problem Turkey has been dealing with in recent years and the government will continue to tackle it in a structural way,” she said.