Turkey economy grew 2.6% in Q3; seen cooling to 3% in 2024
ISTANBUL (Reuters) -Turkey’s economy is expected to have expanded 2.6% in the third quarter due to slower domestic demand and the weight of tighter economic policies, a Reuters poll showed on Tuesday, with the rate seen cooling to 3% for the year as a whole.
The economy grew 5.3% in the first quarter of this year with strong domestic demand pushed up by a minimum wage hike and households bringing purchases forward in expectation of higher inflation ahead.
In the second quarter, sagging demand brought growth down to 2.5% in the face of a monetary tightening campaign that began in June 2023, since which the central bank has hiked its key interest rate to 50% from 8.5% in order to lower inflation.
For the third quarter, the median estimate in a Reuters poll of 14 economists was for GDP growth of 2.6%, with forecasts ranging between 2% and 3.1%.
Trend gross domestic product (GDP) growth has been between 4-5% in recent years.
The economy grew an annual 5.1% in 2023 and 6.5% in the third quarter of that year despite a slowdown in main trading partners and fallout from devastating earthquakes in February.
Economists expect tight monetary policies and fiscal measures will continue to slow domestic demand through year end.
In a recent note, HSBC said high frequency data for the third quarter is mixed with industrial output and services production declining quarterly while retail sales growth was very strong.
“On the external side, monthly data show that both export and import volumes fell…which suggests continued re-balancing of growth drivers in H2 2024. We expect Q3 and Q4 to see modest q-o-q output declines (-0.5% and -0.3% q-o-q, respectively),” HSBC said.
“After the Q4 trough, we have pencilled in a gradual pace of recovery in 2025 as high inflation will require a prolonged period of tight policy.”
GDP growth in 2024 is expected to be 3%, based on the median estimate in the Reuters poll. Predictions ranged from 2.7% to 3.4%.
Turkish Central Bank Governor Fatih Karahan said earlier this month that the demand conditions in the Q3 is at a level that will support the decline in inflation. Karahan also said the rebalancing in domestic demand will continue.
The government has pledged to cool inflation, change the composition of economic growth and attain sustainable levels. The government forecasted the economy to grow 3.5% this year and 4% next.
According to the median of the poll, economists expect the economy to expand 2.9% next year, as they see tight economy policies to continue to bring down inflation and domestic demand.
The Turkish Statistical Institute will release Q3 growth data at 0700 GMT on Nov 29.