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Turkish economy grows 6.7 percent in third quarter after initial virus wave

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Turkey’s economy roared to a more-than-expected 6.7 percent growth rate in the third quarter, as a flood of credit helped it rebound from a 10 percent contraction in the previous period when lockdowns were imposed to curb the initial coronavirus wave, according to Reuters.

The burst of growth, including a more than 15 percent jump from the previous quarter, may be brief. Coronavirus cases have surged to record levels this month, triggering new restrictions that are expected to limit growth through year-end.

Yet the surprising third quarter strength — driven by fiscal stimulus and the lifting of virus-related restrictions — may allow the economy to narrowly avoid a full-year contraction after having suffered two major slumps in as many years.

Adding to constraints on the Middle East’s largest economy, the central bank hiked rates on November to 15 percent to contain a plunging lira and double-digit inflation.

“While the economic rebound in Q3 was strong, the next stage of Turkey’s recovery will almost certainly be more difficult,” said Jason Tuvey of Capital Economics, who noted Turkey’s “worsening virus outbreak.”

Financial sector activity soared by 41.1 percent in the third quarter, information and communication by 15.0 percent, industry by 8.0 percent and construction by 6.4 percent, according to data from the Turkish Statistical Institute (TurkStat).

In a Reuters poll, gross domestic product was forecast to have expanded 4.8 percent year-on-year, reflecting a broad rebound in manufacturing, spending and trade in the July-September period.

The lira was little moved, up 0.2 percent at 7.8 versus the dollar.

On a seasonally and calendar-adjusted basis, third quarter GDP grew 15.6 percent from the previous quarter, the data showed. GDP shrank 9.9 percent in the second quarter after expanding 4.5 percent in the first.

The spike in new virus-related cases and deaths in recent weeks prompted a weekend curfew and other measures in November, a month in which the economic confidence index slid for the first time since April.

Ankara said the new measures would be less restrictive than in the spring and would not hamper supply and production chains. President Recep Tayyip Erdoğan this month replaced his top two economic policymakers and promised a new market-friendly era.

The government has forecast growth of 0.3 percent this year but said the economy could contract 1.5 percent in a worst-case scenario. In the Reuters poll, full-year GDP was forecast to be flat, with estimates ranging from growth of 0.6 percent and contraction of 5 percent.

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