Turkey's economy grew a stronger-than-expected 5.0 percent in the first quarter of 2017, official data showed on Monday, driven by government stimulus measures and a surge in export growth. The robust data surprised market analysts, whose consensus forecast had been for 3.8 percent, and indicated the economy is managing to turn the corner following a slump in the wake of a failed coup last July.
The Turkish economy grew 4.5 percent in the first quarter of 2016, but only 2.9 percent overall in 2016. The growth rate in the last quarter of 2016 stood at 3.5 percent. The official data published by the Turkish Statistics Institute (TUIK) showed that the main driver of the strong first quarter was exports of goods and services, increasing by 10.6 percent.
"That appears, in part, to have been a result of the weakness of the lira supporting the competitiveness of goods exports," said William Jackson, senior emerging markets economist at Capital Economics in London. The lira has lost over 20 percent against the dollar over the last year, although it has rallied slightly in recent months. Imports however increased only 0.8 percent.
Analysts at QNB Finansbank said the strong first quarter growth was down to measures like increased government spending, tax breaks and state-backed encouragement for loans, as well as robust exports. The strong data will be a boost for the government under President Recep Tayyip Erdogan, who in April narrowly won a referendum on boosting his powers, with the economy a key issue.
Deputy Prime Minister Mehmet Simsek welcomed the latest figures, expressing hope the country was on the path back to consistently strong growth. "This increase in growth in the short run is partly to do with the measures we have taken, and partly with the outside situation," he told the private NTV broadcaster.
"There's confidence in the market again ...God willing, Turkey will again set on the course of 5 percent or more growth." Turkey enjoyed stellar growth rates in the early years of Erdogan's rule, peaking at over nine percent in 2004 but growth fell back in recent years with analysts complaining of a dwindling appetite for reform. Simsek said more reforms were needed to make the strong growth sustainable. "The subject we are currently focussing on is the reform," he said. Economists said the first-quarter GDP data suggests that Turkey will grow faster this year than expected, requiring a revision of full-year forecasts. Ozgur Altug, chief economist at BGC Partners, said he had revised his 2017 GDP growth forecast from 2.5 percent to 4.7 percent, versus a government forecast of 4.4 percent.
But he warned that a GDP restatement last year - which saw past data revised - and the discrepancy between monthly and quarterly figures continued to complicate making forecasts. Simsek said the first quarter data and the second quarter forecasts indicate that the growth could be higher than the government's target but added: "It's early to give a certain figure." "The data confirmed that the economy managed to recover in the fourth quarter of 2016 and with a faster pace in the first quarter after the failed coup attempt," he said, saying government measures to stimulate activity were now being felt in the data. QNB Finansbank said their full year forecast was being nudged up one percentage point to 4.3 percent.