Turkey: Economic growth picks up pace in the second quarter
The Turkish economy skyrocketed 21.7% year-on-year in the second quarter. The reading was notably up from the 7.2% expansion logged in the first quarter, and marked the best result since current records began in 1999. However, on a seasonally-adjusted quarter-on-quarter basis, economic growth softened from 2.2% in the first quarter to 0.9% in the second, suggesting that underlying momentum lost some steam.
On the domestic front, household consumption growth soared to 22.9% year-on-year in Q2, markedly up from the 7.0% increase registered in Q1, supported by the easing of restrictive measures. Fixed investment growth accelerated to 20.3% in the second quarter from 12.4% in the first, buoyed by an improvement in business confidence. Public consumption growth also shifted into a higher gear, reaching 4.2% year-on-year in the second quarter, up from 0.7% in the first quarter.
On the external front, growth in exports of goods and services surged to 59.9% in annual terms in the second quarter, significantly up from the 3.0% expansion recorded in the first quarter. Softer lockdowns abroad and the easing of domestic restrictions supported the tourism sector, while goods exports became more competitive amid a cheaper Turkish lira. Meanwhile, imports of goods and services swung from a 1.8% contraction in Q1 to a 19.2% expansion in Q2 amid firming domestic demand. All told, the external sector contributed 6.9 percentage points to GDP in the quarter, up from the 1.1 percentage-point contribution in Q1.
The economy is forecast to grow at a stronger pace in the year as a whole amid strengthening domestic and external demand, thanks to the gradual easing of restrictive measures at home and abroad.
Commenting on the outlook, Muhammet Mercan, chief economist at ING Turkey, added:
“Early indicators for the third quarter point to a continuation of the rebound in economic activity as evidenced by the latest manufacturing PMI, business confidence, foreign trade data and tourist flows etc. Given this backdrop, there is an increasing possibility that growth will surprise on the upside this year, towards the 8% level or higher.”