Growth in Turkey Hits 11.1 Percent

In 2016, the rate of private investment and consumption in Turkey fell in the wake of the failed coup attempt in July. Just a few months on, the economy was once again rocked by a dramatic fall in the value of its currency against the dollar following the election of Donald Trump. In tandem with other emerging markets, this currency volatility left monetary authorities with little room for manoeuvre to enact countercyclical policy. The Central Bank of the Republic Turkey moved to contain the depreciation of the lira by raising interest rates.

The economy has proven resilient to further uncertainty, with growth rates picking up momentum after the third quarter of last year. Growth was driven by a 20.7 percent expansion in the services sector, as well as growth of 14.8 percent in the industrial sector and 18.7 percent in construction.

Economic reforms can provide some explanation for the upswing, with increased government spending on both wages and investments.

However, there are questions surrounding whether this kind of demand-driven growth is sustainable. Turkey’s Deputy Prime Minister Mehmet Şimşek said in an interview on state-run television channel TRT that, while third-quarter growth “is an exceptional figure”, more balance is needed. “Turkey needs to carry out more reforms to have a 5.5 percent to 6.5 percent growth sustainable,” he said, as quoted by Bloomberg.