Turkish Economy Beats Forecasts in First-Quarter 2012 with 3.2% Annual Growth Rate

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Researched by Industrial Info Resources (Sugar Land, Texas)--The Turkish economy grew more strongly than expected in the first quarter of 2012, with an annual rate of 3.2%. Beating the market forecast of 3%, Turkey's gross domestic product (GDP) continued its growth track for the 10th consecutive quarter. According to the Turkish Statistical Institute (TurkStat), the seasonal adjustment figures showed that the economy contracted by 0.4% on a quarterly basis.

The contribution of net exports to growth in the first quarter is 4.5 percentage points, while private sector consumption and investment expenditures had a combined contribution of 0.4 percentage points. The Turkish energy sector grew 8.4% in first quarter, while the manufacturing sector improved just 2.7% in the same period.

The Turkish government tried to slow the economy with tight monetary policy and slow the pace of credit growth to 15% this year. The Turkish economy grew 8.5% in 2011, while the credit growth rate was 25%. The Turkish Central Bank manages monetary policy through the effective funding rate, which is a function of the funds it supplies to the market between the floor and the ceiling of its policy corridor.

"The growth rate is not respectable in absolute terms, but for being very much in line with the soft landing, accompanied by some rebalancing target put forth by policy makers last year," said Cevdet Akcay, chief economist of Yapi Kredi Bankasi.

Also, the seasonally adjusted capacity utilization rate fell to 73% in June, the lowest since September 2010, compared with the first quarter average of 76.2%. The Turkish economy is forecast to grow 4% annually in 2012, while the International Monetary Fund forecasts 2.6% growth for this year.

The Turkish economy has been resilient to heightened stress in the euro area and a weak recovery in most advanced economies. Although reduced, vulnerabilities remain, analysts said.

"Turkey is among the most vulnerable in the emerging world to deterioration in the global financing environment, thanks to its large current account deficit," said Neil Shearing, an emerging markets economist for Capital Economics. "Our forecasts remain for GDP growth of just 1.5% this year and 2.5% in 2013. The economy seems to have fared better in the second quarter, compared to the first quarter."

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