Turkey's economy grows 3.8% in 2nd quarter, above market forecast

Turkey's economy grew 3.8% year-on-year in the second quarter of 2023, better than the market forecast, according to data released by the country's statistical authority on Thursday.

The country's gross domestic product at current prices surged 60.7% from last year to 5.5 trillion Turkish liras ($271.5 billion) in the April-June period, the Turkish Statistical Institute (TurkStat) said.?

Economists had expected Turkey's economy would grow 3.5% on an annual basis in the second quarter.

The figure followed a downwardly-revised 3.9% annual growth in the first quarter of 2023.

On a quarterly basis, the Turkish economy grew 3.5% in the three months to June, shifting from a 0.1% contraction in the previous period.

Value added increased the most among the services – wholesale and retail trade, transport, storage, accommodation, and food service activities – constituting a gross domestic product of 6.4% year-on-year in April-June.

The figures increased by 6.2% in the construction sector and 1.2% in agriculture, but decreased by 2.6% in industry during the same period.

Imports of goods and services soared 20.3% in the three-month period compared to last year, while exports of goods and services plunged 9%.

The final consumption expenditures of resident households hiked 15.6% in the second quarter of 2023.

Government final consumption expenditure grew by 5.3% in the same period.

TurkStat also said that Turkey's annual GDP growth rate for 2022 was revised slightly downwards to 5.5%.

Commenting on the data, Treasury and Finance Minister Mehmet Simsek praised Turkey's second-quarter annual growth rate amid a challenging global and domestic backdrop.

"Despite tight global financial conditions and global trade that shrank by 1.8% from the last year, our economy maintained its strong growth performance in the second quarter of 2023, when we (the government) tried to compensate for the economic effects of the earthquake," Simsek said in a statement.

Two powerful earthquakes hit 11 provinces in southern Turkey on Feb. 6, causing extensive damage and killing and injuring tens of thousands of people.

Simsek pointed out that net exports shaved real GDP growth by 6.3 percentage points in the second quarter.

"While the decrease in real exports continues led by weakening in global activity, imports continued to grow due to strong domestic demand. Thus, net foreign demand limited growth," he said, adding: "This indicates that sustaining monetary policy tightening and fiscal consolidation remain essential for the foreseeable future. Macro-financial stability remains our top priority in the short run."

Simsek underlined that investment expenditures, which are important for boosting the economy’s productive capacity, edged up by 5.1%.

"Our goal is for growth to be strong, but also balanced, sustainable, and inclusive," Simsek highlighted.

The government aims to strengthen the economy against external shocks by prioritizing the transfer of resources to investment, employment, production, and exports rather than consumption, he added.

Noting that the positive effects of the policies implemented on macro-financial stability are being seen, Simsek said: "We will continue to take the necessary steps to ensure these effects are permanent and stability is ensured. It is our priority that the hike in welfare that will be achieved through balanced and sustainable growth is shared fairly by all segments of the society."