Turkey's economy grew a larger-than-expected 4.8 percent in the first quarter, official data showed on Friday, outperforming major emerging markets peers, as wage hikes and spending by Syrian migrants fuelled private consumption. Domestic demand contributed 6 percent of the growth, data from the Turkish Statistics Institute showed, but net external demand wiped off 1.5 percent, meaning Turkey is importing more than it exports, taking the shine off the headline figure.
"Its peers, Brazil, Russia and South Africa are mired in recession, or with feeble growth drivers," Nomura strategist Tim Ash said in e-mailed comments, but added: "The structure of growth was less impressive, with private consumption and government spending leading the way, over investment and net exports." The year-on-year growth in gross domestic product came in slightly above a Reuters poll forecast of 4.5 percent, prompting the finance and development ministers to say Turkey was clearly on track to meet its goal of 4.5 percent growth this year.
Output grew 0.8 percent in the period on a seasonally and calendar-adjusted basis, the Turkish Statistical Institute said. Deputy Prime Minister Mehmet Simsek said the figures showed the economy was on a strong path and said the government would push ahead with structural reforms in the coming period. Finance Minister Naci Agbal said in a statement that those reforms, as well as closer integration with the European Union, would help Turkey to outperform other emerging markets. Agbal told Reuters last month, after being reappointed in a new cabinet, that Turkey would take "swift and bold" economic decisions this year and promised reforms - which many investors say are long overdue - to boost exports and employment.
But investors fear reform momentum will slow under new Prime Minister Binali Yildirim, a close ally of President Tayyip Erdogan, who wants to see strong consumption-led growth. Economists said public sector salary increases and a 30 percent hike in the minimum wage, a pledge made ahead of elections last November and introduced by the ruling AK Party at the start of the year, had contributed to the strong first quarter growth figures. The more than 2.7 million Syrian refugees sheltering in Turkey also bolstered the numbers, economists said. The migrants, fleeing a civil war that has raged for five years, have bought goods such as refrigerators and cookers, a well as cooking oil, bread, flour and building materials. "Among the factors triggering domestic demand are the general impact of Syrian migrants on the economy and the AKP's pre-election promises (on wages)," Oyak Securities chief economist Mehmet Besimoglu told Reuters.