Turkish economy contracted less than expected in Q2: report

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(PHOTO: AFP)

The Turkish economy contracted less than expected in the second quarter, 1.5 percent year-on-year, as it looks to shake off the effects of a recession brought on by last year’s currency crisis, Reuters reported.

Compared with the first quarter, gross domestic product grew at a seasonally and calendar-adjusted 1.2 percent, its second positive reading in a row, according to Turkish Statistical Institute data.

Turkey’s economy has a track record of more than 5 percent growth, but inflation and interest rates soared after the Turkish lira lost some 30 percent of its value last year and domestic demand fell sharply as it tipped into recession.

Measured annually, Turkey’s economy has contracted for the past three quarters. A Reuters poll forecast a 2 percent year-over-year contraction in the second quarter, leading to zero growth in 2019.

Consumption in the latest quarter was stronger than economists predicted, and net exports, helped by the weak lira, also limited the annual contraction, suggesting a recovery may have taken hold.

The lira is down another 9.6 percent so far this year, but a dip in inflation in recent months opened the door for the central bank to slash rates below 20 percent in July and begin a monetary easing cycle. Business investment, held down by high borrowing costs and currency uncertainty, fell in the second quarter to help keep overall year-over-year GDP negative. Industrial production weakened significantly in June.

The government made revisions to GDP data going back to early 2017 — including a slightly smaller annual contraction of 2.4 percent in the first quarter of 2019 — which generally showed a bit stronger past performance.

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