Turkey economy posts powerful Q2 rebound after last year’s slump

A man feeds seagulls as he travels on a ferry over the Bosphorus in Istanbul (file). Turkey’s economy grew a massive 21.7% in the second quarter as expected, official data showed on Wednesday, rebounding powerfully after a sharp slowdown a year earlier driven by Covid-19 restrictions.

Turkey’s economy grew a massive 21.7% year-on-year in the second quarter, as expected, official data showed on Wednesday, rebounding powerfully after a sharp slowdown a year earlier driven by Covid-19 restrictions. It expanded 0.9% compared to the previous quarter on a seasonally and calendar-adjusted basis, data from the Turkish Statistical Institute showed. The lira firmed as far as 8.29 after the figures from a close of 8.32. However, the boom in economic activity is feeding into — and in turn being eroded by — double-digit inflation. August’s inflation reading, due on Friday, is expected to stay close to July’s 18.95%. Treasury and Finance Minister Lutfi Elvan, commenting on the growth data, stressed the importance of tackling inflation. “For sustainable and comprehensive growth, low inflation, exchange rate stability and predictability are of critical importance,” Elvan said on Twitter. The year-on-year economic growth figure was exactly in line with a Reuters poll for the second quarter. The poll also forecast full-year growth of 7.95%, but the latest data was seen prompting some upward revision. “July-August leading indicators showed that economic activity sustained its momentum in the third quarter,” said Burumcekci Consulting’s Haluk Burumcekci, who raised the full-year growth forecast to 9.3% from 7.7%. The $720bn economy grew 1.8% last year, despite a 10.4% plunge in the second quarter, one of only a few globally to avoid annual contraction amid the initial pandemic fallout. Growth in the second quarter was led by services, which bounced back 45.8% annually, followed by industry growth of 40.5% and information and communication sector expansion of 25.3%. Slower growth was displayed by the real estate sector, which expanded 3.7%, construction at 3.1% and agriculture at 2.3%. Separate data on Wednesday reinforced the picture of continuing expansion, with the Purchasing Managers’ Index (PMI) for manufacturing rising to 54.1 in August from 54.0 a month earlier. Turkey re-imposed curfews, weekend lockdowns and restaurant closures this year, including a tougher but brief lockdown in April and May due to surging Covid-19 cases. Manufacturing and the broader economy were largely unaffected by the measures, which were lifted in June. The government officially forecasts 5.8% growth this year, though Elvan has said it could top 8% annually with a strong Q2 performance. Turkey’s economy, which has expanded 5% on average over the last two decades, has languished well below those levels for the last few years.