Turkey’s economy likely grew 5.6% in Q3, and 4.2% in 2023

Turkey’s economy is expected to have expanded 5.6% in the third quarter of 2023, thanks to solid domestic demand and consumption, the median of a Reuters poll showed on Monday, while full-year growth was seen at 4.2%.

Forecasts in the Reuters poll of 17 institutions ranged between 4.6% and 6.4% for gross domestic product (GDP) in the quarter.

“We observe from the retail volume index that although there is a weakening compared to the previous quarter, domestic demand is still very strong in the third quarter. The working day effect also contributes to GDP growth during this period,” said Serkan Gonencler, chief economist at Gedik Yatirim.

“In the last quarter, we expect GDP growth to decline to around 2.5 to 3% with the slowdown in domestic demand becoming more marked.”

The economy grew 3.8% in the second quarter as Turkey’s central bank had implemented a long-running low-rates policy with President Tayyip Erdogan prioritising growth, exports and investment over bringing inflation down, before May elections.

Since June however, the bank has pivoted and hiked its policy rate to 40% from 8.5%. Economists expected sharply tighter monetary policy after the election would lead to an economic slowdown through year end.

“With monetary policy tightness maintained throughout most of 2024, annual GDP growth may decline to around 1.5% in 2024,” said Gonencler.

The median estimate of 10 economists for growth in 2023 stood at 4.2% in the Reuters poll, with forecasts between 4% and 4.5%.

The economy bounced back strongly from the COVID-19 pandemic and grew 5.6% in 2022, on strong domestic demand and exports. That was despite a slowdown in growth for its main trading partners due to the Russia-Ukraine war, which hurt exports in the second half of that year.

The Turkish Statistical Institute will release Q3 growth data at 0700 GMT on Nov. 30.
Source: Reuters (Reporting by Ezgi Erkoyun; Editing by Jonathan Spicer)