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Turkey’s economy grew by 7 percent in first quarter of 2021

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Turkey’s economy grew a more-than-expected 7 percent year-on-year in the first quarter, official data showed on Monday as pandemic restrictions did not temper hot retail sales, exports and manufacturing, according to a Reuters report.

Gross domestic product (GDP) expanded 1.7 percent compared to the previous quarter on a seasonally and calendar-adjusted basis, data from the Turkish Statistical Institute (TurkStat) showed.

While new coronavirus measures were imposed at the end of last year, they did not impede manufacturing or other key sectors, and most were lifted in March. By late April, a strict lockdown was imposed again.

In a Reuters poll, GDP was forecast to have expanded 6.7 percent year-on-year in the first quarter.

The information and communications sector led the growth in the quarter, expanding 18.1 percent annually, followed by some services, which together rose 14.4 percent.

The industrial sector, which has recovered well from the worst of the pandemic fallout last year, grew 11.7 percent. Construction and real estate, drivers in previous years, were the laggards.

The lira firmed as far as 8.48 to the dollar after the GDP data, up nearly 1 percent from Friday’s closing level of 8.56.

While Turkey was one of few economies to expand last year, its growth rate has languished in recent years well below its potential of about 5 percent.

It is expected to return to form this year with 5.5 percent growth according to the poll. But a recent spike in COVID-19 cases risks another lost tourism season, exacerbating the economy’s heavy foreign debt burden.

Economic activity is expected to slow in the second quarter due to tighter financial conditions and the lockdown that covered part of May. Last year, GDP contracted 10.3 percent in the second quarter.

The central bank is expected to begin lowering its policy rate in the coming months from 19 percent.

But inflation, seen rising further in May against the central bank’s expectations, and a recent depreciation in the lira could delay policy easing.

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