August 29, 2008

Turkish economy growth in Q2 lowest since 2002

Turkish Statistical Institute recently revealed that Turkey's economy lost momentum in the three months through July 2007 expanding at its slowest pace since the first quarter of 2002 as high interest rates squeezed consumer spending. Economic growth slowed to 3.9% from a revised 6.9% in the previous three months.

Mr Durmuş Yılmaz governor of Central Bank of Turkey the Central Bank raised interest rates 4.25% points to 17.5%, the highest level in Europe 2006 as it struggled to try and bring inflation down to a 4% target agreed with the International Monetary Fund. Those increases successfully curbed domestic demand and the bank is considering cutting rates in the last quarter.

Inflation has fallen from a high of 70% at the start of 2002 to a 37 year low of 6.9% in July 2007. Record levels of exports and government spending ahead of July 2007 elections helped sustain the According to the median estimate of 12 economists surveyed by Bloomberg economy's 22nd consecutive quarter of growth. While private consumption spending contracted an annual 0.3% in the quarter exports grew 12.7%.

The economy this quarter had been expected to increase by 4%. Exports have expanded an annual average of 24% every month this year. They rose to a record USD 9.1 billion in May 2007 as European economies, the destination of almost 60% of Turkish sales abroad, drew in products such as cars and refrigerators. Growth in the three months through June 2007 was also helped by government spending on water supplies and roads in the run-up to elections. Non-interest government spending increased 26% in January to June 2007 from the same period in 2006.