Turkey third quarter growth slows significantly

Economic growth figures down considerably from same quarter last year, reflecting dramatic fall of lira during US-Turkey tensions.
Monday 10/12/2018
The Turkish lira traded at 5.3 against the dollar on Monday
The Turkish lira traded at 5.3 against the dollar on Monday

ANKARA - Turkey's economic growth slowed considerably in the third quarter, official data showed on Monday, reflecting the effects of the currency crisis and high inflation.

Compared to the third quarter of 2017, the Turkish economy grew by 1.6 percent in the three months to September, figures from the Turkish Statistics Institute (TUIK) showed.

The figure was substantially lower than the 5.3 percent -- revised on Monday from 5.2 percent in September -- recorded in the second quarter.

Seasonally and calendar adjusted the economy contracted by 1.1 percent in the third quarter compared with the second.

The Turkish lira traded at 5.3 against the dollar on Monday after 0800 GMT, showing minimal movement from 5.29 before the data release as markets had expected a slowdown.

The latest figures reflect the dramatic fall in the value of the lira in August, when it briefly breached seven to the dollar during US-Turkey tensions and concerns over domestic monetary policy under Turkish President Recep Tayyip Erdogan.

Since then, Washington and Ankara ties have warmed up following the release of an American pastor from a Turkish prison in October and the lira has rallied.

However, inflation surged to 25.24 percent in October, a 15-year high, before it dropped to 21.62 percent in November.

The rate of increase in consumer prices was 10.35 percent in January this year.

Jason Tuvey, senior emerging markets economist at London-based Capital Economics, warned in a note on Monday that the Turkish economy "has probably entered a technical recession" in the fourth quarter.

A recession is defined as two consecutive quarters of shrinking output based on a quarter-on-quarter comparison.

Tuvey said that Capital Economics expected the Turkish economy to contract 0.5 percent in 2019, noting that this estimate was "below the consensus forecast for growth of 0.6 percent."