Turkey: Growth decelerates in the third quarter
December 10, 2010
In the third quarter, gross domestic product (GDP) expanded 5.5% over the same quarter last year. The figure was well below the 10.2% expansion recorded in Q2 (previously reported: +10.3% year-on-year) and undershot market expectations, which had anticipated growth would decelerate less markedly to 6.5%. The slowdown in the annual figures was influenced by a waning base effect, as the economy had contracted only 2.7% in the third quarter of 2009 (Q2 2009: -7.6% year-on-year). However, a quarter-on-quarter comparison confirms the deceleration, as the economy expanded 1.1% over the previous quarter in seasonal and calendar adjusted terms, after having surged 3.7% qoq in the second quarter. Growth in the third quarter was driven by a strong expansion in the domestic sector. Private consumption improved to a 7.6% year-on-year expansion (Q2: +6.2% yoy), while gross fixed investment maintained the buoyant pace, surging 31.3% over the same quarter last year (Q2: +28.7% yoy). Meanwhile, the net contribution from the external side of the economy remained negative, as imports continued to outpace exports. Exports swung from an 11.6% expansion in Q2 to a 2.0% contraction in Q3. Imports, on the other hand, remained resilient and expanded 16.9% (Q2: +18.8% yoy). As a result, the net contribution from the external sector to overall growth deteriorated from minus 2.0 percentage points in the second quarter to minus 4.6 percentage points in the third. At the sector level, the deceleration was widespread with growth slowing in three major components. Industry expanded 8.6% (Q2: +14.7% yoy), services moderated to a 6.5% rise (Q2: 9.3% yoy) and agriculture contracted 0.7% (Q2: +1.1% yoy). The government expects GDP to expand 6.8% this year.