Turkey’s economy expanded 7.5 percent annually in the second quarter of the year, a Reuters poll showed on Wednesday, while the full-year growth forecast stood at 4 percent, pointing to a drop in economic activity in the second half of the year reflecting weaker demand.
The economy expanded 7.3 percent year-on-year in the first quarter, driven by strong performance, strong exports and robust domestic demand. It was expected to have kept up the strong performance in the second quarter.
President Recep Tayyip Erdoğan’s new economic program has prioritized growth and exports while aiming to tackle inflation by shoring up Turkey’s chronic current account deficit instead of rate hikes.
An easing cycle under Erdoğan’s program led the lira to end last year down 44 percent against the dollar and shed another 27 percent so far this year, sending inflation to a 24-year high of nearly 80 percent in July.
While the rate cuts aimed at stimulating the economy, analysts predict that activity could cool in the second half of the year due to a downward trend in demand and an expected economic slowdown in Turkey’s largest trade partners.
The median estimate of 13 economists in a Reuters poll for annual gross domestic product (GDP) growth (TRGDPQ=ECI) in the second quarter stood at 7.5 percent, within a range of 5 percent and 8.7 percent.
The full-year growth was lower, with the median estimate of 18 economists standing at 4.05 percent and forecasts ranging between 3.3 percent and 5 percent.
Turkey’s central bank cited signs of a slowdown in the third quarter last week when it shocked markets by cutting its policy rate (TRINT=ECI) by 100 basis points to 13 percent.
“It is important that financial conditions remain supportive to preserve the growth momentum in industrial production and the positive trend in employment,” the bank said.
Finance Minister Nureddin Nebati said on Tuesday that he expects growth in the second quarter to come in higher than the 7.3 percent recorded in the first quarter.
Turkey’s economy was one of few to narrowly expand in 2020, thanks largely to cheap loans. It bounced back in 2021, expanding 11 percent.
The Turkish Statistical Institute is expected to announce second quarter growth results at 0700 GMT on Aug. 31.