Turkey’s economic growth slows to 3.9% in Q3 as foreign demand falls

By Nevzat Devranoglu and Ali Kucukgocmen

ANKARA (Reuters) – Turkey’s economy expanded 3.9% in the third quarter from a year ago, according to official data released on Wednesday, though growth slowed from the previous quarter as a global slowdown put a drag on exports, but the tourism sector remained strong.

Gross domestic product (GDP) contracted 0.1% from the previous quarter on a seasonally and calendar-adjusted basis, data from the Turkish Statistical Institute showed, marking the first contraction since the height of the COVID-19 pandemic in the second quarter of 2020.

Economists expect full-year growth of 5%, in line with forecasts, according to the latest Reuters poll, after a strong first half of the year.

Economists expect growth to slow further in Q4.

“It seems it is still possible to attain the 5% growth target if there is no quarterly contraction of more than 0.5% in Q4,” Haluk Burumcekci, of Burumcekci Consulting, said.

The outlook for 2023 remains uncertain. A national election should take place no later than June, and an opposition victory could see a sharp reversal of President Tayyip Erdogan’s economic policies.

Private consumption remained strong in the third quarter.

Analysts predicted growth would slow in the second half due to a downward trend in foreign demand, notably among Turkey’s largest trade partners.

To counter the slowdown, Turkey’s central bank embarked on an easing cycle between August and November, slashing its policy rate by 500 basis points to 9%.

Erdogan’s economic programme over the last 14 months prioritised growth and exports.

Central bank interest rate cuts that were sought by Erdogan last year led to a 44% depreciation in the lira and it has lost another 29% against the dollar this year, sending inflation to a 24-year high of more than 85% in October.

Last year, Turkey’s economy bounced back strongly from the COVID-19 pandemic and grew 11.4%, its highest rate in a decade. Annual growth in the second quarter of 2022 was revised to 7.7% from 7.6%, data showed on Wednesday.

(Reporting by Nevzat Devranoglu and Ali Kucukgocmen; Editing by Jonathan Spicer, Ece Toksabay and Simon Cameron-Moore)