Turkey’s economy roared to a more-than-expected 6.7% growth rate in the third quarter, as a flood of credit helped it rebound from a 10% contraction in the previous period when lockdowns were imposed to curb the initial coronavirus wave.
The burst of growth, including a more than 15% jump from the previous quarter, may be brief. Coronavirus cases have surged to record levels this month, triggering new restrictions that are expected to limit growth through year-end.
Yet the surprising third quarter strength – driven by fiscal stimulus and the lifting of virus-related restrictions – may allow the economy to narrowly avoid a full-year contraction after having suffered two major slumps in as many years.
Adding to constraints on the Middle East’s largest economy, the central bank hiked rates in November to 15% to contain a plunging lira and double-digit inflation.
“While the economic rebound in Q3 was strong, the next stage of Turkey’s recovery will almost certainly be more difficult,” said Jason Tuvey of Capital Economics who noted Turkey’s “worsening virus outbreak”.
Financial sector activity soared by 41.1% in the third quarter, information and communication by 15.0%, industry by 8.0% and construction by 6.4%, according to data from the Turkish Statistical Institute.
In a Reuters poll, gross domestic product was forecast to have expanded 4.8% year-on-year reflecting a broad rebound in manufacturing, spending and trade in the July-September period.
The lira was little moved, up 0.2% at 7.8 versus the dollar.
On a seasonally and calendar-adjusted basis, third quarter GDP grew 15.6% from the previous quarter, the data showed. GDP shrank 9.9% in the second quarter after expanding 4.5% in the first.
The spike in new virus-related cases and deaths in recent weeks prompted a weekend curfew and other measures in November, a month in which the economic confidence index slid for the first time since April.
Ankara said the new measures would be less restrictive than in the spring and would not hamper supply and production chains. President Tayyip Erdogan this month replaced his top two economic policymakers and promised a new market-friendly era.
The government has forecast growth of 0.3% this year but said the economy could contract 1.5% under in a worst-case. In the Reuters poll, full-year GDP was forecast to be flat with estimates ranging from growth of 0.6% and contraction of 5%.
Editing by Jonathan Spicer and Alison Williams