ISTANBUL—The Turkish economy slowed to 2.9% expansion on the year in the second quarter, a lower rate than expected, suggesting that the government could fail to meet its 4% economic growth target this year.
Monday's official gross domestic product growth figure was below the average forecast of 3.3% growth, according to seven analysts polled by Dow Jones Newswires.
In seasonally adjusted terms, GDP rose 1.8% in the second quarter from the first quarter and grew 3.2% on the year. According to data from Turkey's statistics agency, Turkey's second-quarter growth came after a revised 3.3% expansion on the year in the first quarter.
After the data, the Turkish lira little moved against the dollar. At 1005 GMT, the Turkish lira was trading 0.1% lower against the dollar. The yield on two-year benchmark bonds traded at 7.31% compared with 7.35% on Friday.
Economists expect weaker GDP growth in the final two quarters. The government is targeting 4% economic growth this year, which is already well below the 8.5% pace in 2011.
"With first-half growth at 3.1% and signs of slowdown in the second half mounting, we remain comfortable in our full-year growth forecast at 2.9%," said Inan Demir, chief economist with Finansbank.
According to a breakdown of the data, domestic private consumption slowed to minus 0.5% in the second quarter from a growth of 0.2% in the first quarter. Net exports contributed 5.7 percentage points to the GDP growth.
Turkey has managed to diversify its export markets despite economic and political turbulence all around it.
As the economic crisis in the European Union, the largest buyer of Turkish goods, crimped demand to the west, Turkey increased sales to the Middle East and North Africa.
Turkey continued to raise its export revenue, which reached a record $135 billion last year, or about 17% of GDP.
Turkey's economy has grown with the contribution of net exports since the fourth quarter, said economy minister Zafer Caglayan in emailed comments after the data.
"It is becoming difficult to grow above 4% this year," said Mr. Caglayan. "The central bank shouldn't be late to step its foot back from brake," said Mr. Caglayan, urging the central bank again to loosen its policy further to support economic growth.
As of August, inflation was down to 8.9% from as high as 11.1% in April. The current-account deficit declined to $63.5 billion, or 8% of GDP, in June from a record $78.6 billion in October.
With these indicators, central bank Governor Erdem Basci is expected to shift his focus to economic growth. The central bank eased effective funding costs to 6.2% on Monday from as high as 10.2% in June.
The central bank will "most certainly" shift to a looser monetary policy, especially as inflation continues its downward trend, Gizem Oztok Altinsac, an economist with Garanti Securities, wrote in a note.
Ms. Altinsac expects a 0.5 percentage point cut to the ceiling of the so-called interest rate corridor of 5.75% to 11.5% at the monetary policy committee meeting next week.
Separate data from Turkey's statistics agency showed Monday that Turkey's industrial output, a leading measure of economic performance, rose 3.4% in July, beating expectations.
It was up from 2.7% in June. "July industrial output showed that the economic activity has been expanding at a mild pattern.
Considering together with the leading indicators, which suggest some uptick in domestic demand is likely in the coming months, we believe our forecast for 3.3% GDP growth in 2012 is reachable," said Nilufer Sezgin, chief economist with Ekspres Invest.
wsj.com
Monday's official gross domestic product growth figure was below the average forecast of 3.3% growth, according to seven analysts polled by Dow Jones Newswires.
In seasonally adjusted terms, GDP rose 1.8% in the second quarter from the first quarter and grew 3.2% on the year. According to data from Turkey's statistics agency, Turkey's second-quarter growth came after a revised 3.3% expansion on the year in the first quarter.
After the data, the Turkish lira little moved against the dollar. At 1005 GMT, the Turkish lira was trading 0.1% lower against the dollar. The yield on two-year benchmark bonds traded at 7.31% compared with 7.35% on Friday.
Economists expect weaker GDP growth in the final two quarters. The government is targeting 4% economic growth this year, which is already well below the 8.5% pace in 2011.
"With first-half growth at 3.1% and signs of slowdown in the second half mounting, we remain comfortable in our full-year growth forecast at 2.9%," said Inan Demir, chief economist with Finansbank.
According to a breakdown of the data, domestic private consumption slowed to minus 0.5% in the second quarter from a growth of 0.2% in the first quarter. Net exports contributed 5.7 percentage points to the GDP growth.
Turkey has managed to diversify its export markets despite economic and political turbulence all around it.
As the economic crisis in the European Union, the largest buyer of Turkish goods, crimped demand to the west, Turkey increased sales to the Middle East and North Africa.
Turkey continued to raise its export revenue, which reached a record $135 billion last year, or about 17% of GDP.
Turkey's economy has grown with the contribution of net exports since the fourth quarter, said economy minister Zafer Caglayan in emailed comments after the data.
"It is becoming difficult to grow above 4% this year," said Mr. Caglayan. "The central bank shouldn't be late to step its foot back from brake," said Mr. Caglayan, urging the central bank again to loosen its policy further to support economic growth.
As of August, inflation was down to 8.9% from as high as 11.1% in April. The current-account deficit declined to $63.5 billion, or 8% of GDP, in June from a record $78.6 billion in October.
With these indicators, central bank Governor Erdem Basci is expected to shift his focus to economic growth. The central bank eased effective funding costs to 6.2% on Monday from as high as 10.2% in June.
The central bank will "most certainly" shift to a looser monetary policy, especially as inflation continues its downward trend, Gizem Oztok Altinsac, an economist with Garanti Securities, wrote in a note.
Ms. Altinsac expects a 0.5 percentage point cut to the ceiling of the so-called interest rate corridor of 5.75% to 11.5% at the monetary policy committee meeting next week.
Separate data from Turkey's statistics agency showed Monday that Turkey's industrial output, a leading measure of economic performance, rose 3.4% in July, beating expectations.
It was up from 2.7% in June. "July industrial output showed that the economic activity has been expanding at a mild pattern.
Considering together with the leading indicators, which suggest some uptick in domestic demand is likely in the coming months, we believe our forecast for 3.3% GDP growth in 2012 is reachable," said Nilufer Sezgin, chief economist with Ekspres Invest.
wsj.com
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