Surprise Q1 growth insufficient to revise targets
Posted by meb at July 1st, 2008
With a revival in the agriculture sector, Turkey has achieved a spectacular growth rate of 6.6 percent in the first quarter, far greater than estimated; however, economy experts believe this figure will not suffice to become more optimistic for the remaining quarters of the year.
Economists stress that the impact of political instability and uncertainty, a US-oriented sub-prime mortgage crisis that has lasted longer than anticipated and the central bank’s increased interest rates will become more visible through the end of the year, further noting that it is too early to revise year-end expectations.
The Turkish Statistics Institute (TurkStat) yesterday released first quarter figures for gross domestic product (GDP),which has grown by 17.5 percent, totaling YTL 221.70 billion. Last year’s growth rate was 4.5 percent in the same period. Finans Investment chief economist Banu Kıvcı Tokalı, who drew attention to the impact of the performance of the industrial sector in the first quarter growth figures and to the revival in the agriculture sector, told Reuters: “If the growth in agriculture remains the same in the coming quarters, it will keep supporting the growth rate.
The service sector is still the most influential item in the economic growth. Its growth in the first quarter is 5.5 percent, which is lower than the 8 percent industrial growth.” Recalling that they would not revise the growth expectations because of unexpected figures of the first quarter, Tokalı noted that they might consider making revisions only if the second quarter figures are better than the estimates.
Express Invest chief economist Güldem Atabay, noting that the first quarter figures were better than expected, said: “I still expect a rapid slowdown in the second quarter in connection with the global mortgage crisis and the increased interest rates. Political uncertainty and high interest rates intimidate consumers.” Atabay noted that second quarter estimates might be revised, adding that year-end expectation of a GDP growth rate of 3.5-4 percent will still remain the same.
The business world reacted differently to the surprising figures. Ankara Chamber of Commerce (ATO) Chairman Sinan Aygün asserted that the actual growth rate was 4.3 percent when the last quarter figures of last year are considered. In a written statement, Aygün said the growth rate is falling below 4 percent and further added: “The 6.6 percent growth rate in the first quarter should not mislead us. Growth is slowing down.”
Independent Industrialists and Businessmen’s Association (MÜSİAD) Chairman Ömer Cihad Vardan, however, applauded Turkey’s performance in achieving such a high growth rate in the first quarter, saying the score was quite positive, considering the adverse effects of recent global turbulence and all other negativities in both domestic and foreign markets. These figures are inspiring for the future, he added.
Recalling that the overall growth rate last year was 4.5 despite the first quarter coming in at 7.6 percent, Aygün commented that this year’s growth rate will fall below 4 percent considering that the first quarter’s growth rate was 6.6 percent. Konya Chamber of Commerce Chairman Tahir Büyükhelvacıgil said the unexpectedly high growth rate in the first quarter of the year might serve as an incentive for industrialists to invest. In a statement made to the Anatolia news agency, Büyükhelvacıgil noted that the economic indicators over the last five years were promising, adding that the recent slowdown in the economy caused partial pessimism among industrialists.
Noting that foreign capital investments in addition to domestic investments were needed for a sustained rate of economic growth, Büyükhelvacıgil said: “Turkey is heading down the right path. Everyone should be hopeful of the future. Our goal is to make Turkey one of the 10 largest economies in the world. But to achieve this, obstacles before investment should be removed, and everyone should exert more effort.”
Turkish Union of Agricultural Chambers (TZOB) Chairman ?emsi Bayraktar noted that the realized growth rate of 5.6 percent in the agricultural sector for the first quarter of the year may not be sustainable throughout the entire year. In a written statement Bayraktar underlined that an overall shrinkage of 7.3 percent was measured in the agricultural sector last year.
Turkish Agriculturalists’ Association (TZD) Chairman İbrahim Yetkin said that they observed a tendency of shrinkage in the sector despite the announced growth rate. In a written statement Yetkin said: “The agricultural sector has been suffering from serious structural problems. For this reason, a tendency for the sector to shrink persists.”
Yetkin further noted that the announced 5.6 percent growth rate for the first quarter of this year did not fully compensate for the dramatic shrinkage of last year.
Resurrection in private sector investment
A revival has been seen in private sector investment in the first quarter of the year, in contrast to a clear decline in public investment. The 1.8 percent rate increase in the first quarter of last year for the creation of gross fixed capital by the private sector increased to 11.3 percent in the same period. Investment in capital equipment for the private sector, which shrank by 3.6 percent in the first quarter of last year, has grown by 15.6 percent in the same period of this year. The growth rate of private sector construction investments have declined from 12.9 percent to 4.8.
Meanwhile, the GDP growth rate based on expenditures is 4.7 percent in terms of public final consumption expenditure and 0.8 percent in terms of wage-salary in the first quarter of 2008. Because of the decline in construction investment, the gross fixed capital generation of the public sector has declined whereas capital equipment investment has rapidly grown. The public sector’s capital equipment investment, which had declined by 3.6 percent last year, has increased exponentially by 37.2 percent. Construction investment by the public sector grew by 5.1 percent last year whereas it has declined by 12.1 percent this year.
The state final consumption expenditures that have grown by 4.7 percent in fixed prices for the first quarter of last year have also increased this year by 4.2 percent. The increase is attributed to the purchases of goods and services. The wage-salary payments within the public final consumption expenditures grew by 0.4 percent only, while the growth rate in goods and services rose by 10.1 percent in the same period.
Household consumption has increased from 5.5 percent to 7.3 percent in the first quarter of this year. The growth rate for domestic consumption of permanent and non-permanent households increased from 5.5 percent to 7.1 percent; the growth rate for domestic consumption of non-permanent households declined from 6.4 percent to 0 percent.
Health industry enjoys biggest growth
The health and social services sector saw the biggest growth, with 11.8 percent over the same period of the previous year, the figures have shown. The industry grew by 7 percent in the same period, while retail and wholesale trade enjoyed a 9.9 percent increase. The agriculture sector, which had suffered a decline of 6.9 percent last year due to a scorching drought, jumped 5.6 percent in the first quarter. The figures also indicated that 1.5 percent more people owned a house of their own. In addition, the government spent 3.6 percent more in social security payments, 0.6 percent more to finance education and 9.6 percent more to subsidize the agricultural sector.
source: Today’s Zaman
Related posts: