Economy’s growth gives signs of alarm
Posted by meb at April 1st, 2008
Turkey’s economic growth for the past year stood at 4.5 percent, half a percentage point below the government’s target, and the worst performance of the past five years, official data showed yesterday.
Growth in the fourth quarter of 2007 was unchanged at a five-year low of 3.4 percent, the Ankara-based Turkish Statistics Institute (TÜİK) announced on its Web site.
Gross domestic product (GDP) in 2007 stood at $659 billion, the agency said, while per capita income increased to YTL 12,132 ($9,333) at current prices.
Economic growth has slowed due to declining consumer spending following the Central Bank’s 2006 move to increase its benchmark rate by 4.25 percentage points to 17.5 percent to curb inflation, reported Bloomberg.
Gross domestic product (GDP) rose by 9.9 percent to YTL 221.23 billion at current prices in the last quarter of 2007, compared to the corresponding period in 2006. Last year, annual GDP was up by 12.9 percent to YTL 856.39 billion at current prices.
The Turkish economy had contracted 5.7 percent in 2001, but the following years saw strong growth, starting with 6.7 percent in 2002.
Analysts pessimistic:
“Agriculture is dragging us down and there’s been no great expansion in domestic demand,” said Erkin Işık, economist at Fortis Bank. “Even if farming recovers in 2008, I think we’ll still see a slowdown in essential areas such as manufacturing.”
Agricultural output fell 9.7 percent in the quarter, while construction expanded 0.5 percent, compared with growth of 4 percent the previous quarter and 18.5 percent in 2006, when the economy as a whole grew 6.9 percent.
The consumer confidence index fell from 96.2 to 93.9 during the fourth quarter and in February hit 87.6, the lowest since records began in 2003. Private consumption increased an annual 2.9 percent in the quarter, slowing from 8.2 percent three months earlier.
“We’ve seen falling consumer confidence over the fourth quarter and spending was not strong,” said Şengül Dağdeviren, economist for Oyakbank. “The outlook for this year is difficult too.”
Credit squeeze:
Turkey is targeting 5.5 percent growth this year, although the global credit squeeze is likely to curb economic activity as banks often fund domestic lending by borrowing abroad. A court case to outlaw the ruling Justice and Development Party (AKP) may also lead to political instability, damping economic expansion.
The Central Bank cut its benchmark overnight borrowing rate by a total of 2.25 percentage points to 15.25 percent between September 2007 and February this year. Any pick-up in domestic demand will be limited by the impact of the global credit squeeze, Central Bank Governor Durmuş Yılmaz said March 13.
Indicators suggest growth is slowing in the first quarter of this year, and problems in global credit markets suggest “the downside risks to economic activity in the coming period have increased,” the Central Bank said in minutes of its March 19 rates meeting published yesterday.
“I expect the political situation to put serious pressure on growth this year,” said Levent Durusoy, chief economist at Yatırım Finansman Securities in Istanbul.
Industrial production increased at an average rate of 5.2 percent in the fourth quarter.
Source: Turkish Daily News
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