Turkey GDP grew 5.9% in Q3 but tightening to bite / REUTERS

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Turkey’s economy expanded by a more-than-expected 5.9% in the third quarter, driven by household spending, but activity should begin to slow after aggressive monetary tightening meant to cool domestic demand and high inflation.

November 30, 2023, Reuters.

Gross domestic product (GDP) grew 0.3% from the previous quarter on a seasonally and calendar-adjusted basis, well down sequentially, data from the Turkish Statistical Institute showed on Thursday.

« The sharp slowdown (in quarterly growth) together with more timely figures for Q4, suggest that the economy is rebalancing in response to the policy tightening this year, » Capital Economics said in a note.

Maintaining the interest rates at restrictive levels will lower growth next year, which will help narrow current account deficits and cut inflation, it added.

In a Reuters poll, the economy was forecast to have expanded 5.6% annually in the third quarter, after which it should cool given the central bank has hiked rates to 40% from 8.5% since June as part of a sharp U-turn toward policy orthodoxy.

The annual reading was the highest since the second quarter of last year. Growth in the second quarter of this year was revised up to 3.9% from 3.8%, the data also showed.

The construction and industrial sectors expanded by 8.1% and 5.7% respectively, while the agriculture sector grew by only 0.3%, the data showed, in part reflecting fallout and rebuilding after this year’s devastating earthquakes in the southeast.

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