Turkey: Economy rebounds strongly in Q4 beating expectations
March 31, 2017
Turkey’s economy surged in the last quarter of 2016, after it contracted for the first time in over seven years in Q3. GDP expanded 3.5% from the same quarter of the previous year, contrasting the 1.3% decrease seen in Q3. The print came in well above the 1.9% increase expected by market analysts, thanks to surging private consumption. The strong quarterly reading and some upward revisions to previous quarters pushed growth for all of 2016 up to 2.9%. However, the result was still a notable slowdown from 2015’s 6.1% increase as momentum was hampered by security concerns and political uncertainty.
Looking at the details, surging household spending drove the economy’s improvement and private consumption increased 5.7% annually—the best result since Q2 2015. The result reflects that a number of government stimulus measures unleased after the failed July coup last year have started to bear fruit. The strong reading comes despite a weakening labor market in the country and stagnant bank lending. Fixed investment growth also rose but remained modest at 2.0% in Q4 (Q3: +0.5% year-on-year). Tight monetary policy and lingering security concerns continue to hamper investment. Meanwhile, public spending slowed from a 5.6% expansion in Q3 to a 0.8% increase in Q4.
The external sector dragged on growth as a rebound in exports was drowned out by faster import growth. Exports bounced back from a 9.3% contraction in Q3 to a 2.3% increase supported by a weak lira. At the same time, imports expanded 3.3%, above Q3’s 2.1%.