Bloomberg News

Turkish Economic Growth Slows to 3.2% in First Quarter

July 03, 2012

(Corrects quarterly GDP data in the fifth paragraph after statistics agency makes correction to show economic contraction, in story dated yesterday.)

Turkey’s economy expanded by an annual 3.2 percent in the first quarter, the slowest pace since 2009.

Growth in the quarter was faster than expected. The median estimate in a Bloomberg survey of nine economists was for an expansion of three percent. The economy had grown 5.2 percent in the fourth quarter, making Turkey the world’s third-fastest expanding economy behind China and Argentina last year.

Turkey is seeking to ensure growth for the economy in the face of a slowdown in the European Union, its biggest trading partner, while putting the brakes on a domestic lending boom. Central Bank Governor Erdem Basci began a dual interest rates policy in October that allows him to respond to changing economic conditions by mixing funding at the benchmark rate of 5.75 percent and a higher rate of 11.5 percent.

“First-quarter figures are supportive of the central bank’s soft landing and re-balancing themes,” Inan Demir, chief economist at Finansbank AS in Istanbul, said in an e-mailed report to clients. “We expect no policy impact after this print. Net exports turned out to be the main growth engine. In contrast domestic demand was markedly weaker in the first quarter.”

Quarterly Growth

The economy contracted 0.4 percent on a quarterly basis in the three months to March, the first shrinkage in three years, according to seasonally adjusted figures. That compared with revised 0.2 percent quarter-on-quarter growth in the last three months of 2011.

Yields on two-year benchmark bonds rose one basis point to 8.48 percent at 11:41 a.m. The main ISE National 100 index declined 0.3 percent to 62,376.35. The lira weakened less than 0.1 percent to 1.8096 per dollar.

Turkey’s economy appears to be close to attaining a soft landing, though its current account deficit is expected to remain high at $61 billion this year, leaving the country vulnerable to volatility in the euro zone, Fitch Ratings said in an e-mailed statement from London on June 28. Fitch rates Turkey at one level below investment grade.

Moody’s Investors Service raised its rating one level to Ba1, one step below investment grade, on June 20 citing an improvement in Turkey’s “macroeconomic resilience.” Turkey is rated two levels below investment grade at Standard & Poor’s.

Turkish exports climbed an annual 13 percent to $35.4 billion in the first quarter, according to data on the Ankara- based statistics agency website. Exports also rose 13 percent annually in the first five months, the agency said.

The pace of growth in exports slowed to 3.6 percent in June alone from a year ago, the Turkish Exporters’ Assembly said in an e-mailed report today.

To contact the reporter on this story: Benjamin Harvey in Istanbul at

To contact the editor responsible for this story: Gavin Serkin at

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