The Turkish economy lost some momentum but remained buoyant in the third quarter of this year, official data showed Wednesday, as a global slowdown put a drag on exports, but the tourism sector remained strong.

The gross domestic product (GDP) expanded by 3.9% in the July-September period, the Turkish Statistical Institute (TurkStat) said. The reading means Türkiye still had one of the best performances among G-20 countries.

In remarks after the data was released, President Recep Tayyip Erdoğan said it was essential that Türkiye continued its growth at a time when recession fears are increasing.

"Hopefully, we will make a good start to 2023 by closing 2022 at a record level," Erdoğan told a meeting of the ruling Justice and Development (AK) Party.

He added that being among the top five countries in the G-20 with its GDP growth rate showed that Türkiye is getting stronger.

Also elaborating on the data, Treasury and Finance Minister Nureddin Nebati said the nine-month GDP growth rate came in at 6.2%.

"We will be one of the strongest growing countries this year, closing the year with a growth rate of around 5%, as we predicted in the medium-term program," Nebati wrote on Twitter.

The data showed that GDP at current prices reached TL 4.26 trillion ($241.5 billion) in the July-September period.

The value added increased by 21.6% in financial and insurance, 13.9% in information and communication, 12.6% in professional, administrative and support service activities, 7.6% in public administration, education, human health and social work activities, 6.9% in services, 4.9% in other service activities, 4.1% in real estate activities, 1.1% in agriculture, forestry and fishing activities and 0.3% in industry respectively, while the construction sector decreased by 14.1%.

The final consumption expenditures of households rose by 19.9%, and government final consumption was up by 8.5% in the third quarter on a yearly basis.

Over the same period, exports of goods and services soared by 12.6%, TurkStat added.

Meanwhile, the Turkstat data showed that GDP contracted 0.1% from the previous quarter on a seasonally and calendar-adjusted basis, marking the first contraction since the height of the COVID-19 pandemic in the second quarter of 2020.

Analysts predicted growth would slow in the second half due to a downward trend in domestic and foreign demand, led by a slowdown in Türkiye's largest trade partners.

The GDP growth was expected to stand at 4% year-over-year in the third quarter, according to the median estimate of 13 economists participating in a Reuters poll this week. Forecasts ranged between 3.% and 4.8%.

A survey by private broadcaster Bloomberg HT and Anadolu Agency (AA) saw the figure at 4.2% and 3.9%, respectively.

To counter the expected slowdown, Türkiye's central bank embarked on an easing cycle between August and November, slashing its policy rate by 500 basis points to 9%.

Sticking to employment-focused policies

The Turkish economy bounced back strongly from the COVID-19 pandemic to expand by 11.4% in 2021, its highest rate in a decade. The July-September expansion yet marked a slowdown from the second quarter, when the GDP grew by a revised 7.7%.

The Turkish government over the last 14 months prioritized low interest rates to boost exports, production, investment and create new jobs as part of an economic program, dubbed the Türkiye Economy Model, which aims to lower inflation by flipping the country’s chronic current account deficit to a surplus.

Nebati on Wednesday said Türkiye’s approach is paying off and vowed the government will stick with its "employment-focused policies."

Inflation remains one of the biggest concerns for the economy, having risen an annual 85.5% through October, driven by a surge in food prices and high energy costs.

Türkiye is almost completely dependent on imports to cover its energy needs, which leaves it vulnerable to rising costs that skyrocketed following Russia’s invasion of Ukraine, and domestic demand has risen after the coronavirus pandemic.

Officials have blamed the inflation on high commodity costs, mainly caused by the war in Ukraine, as well as other external factors.

Given the expected slowdown, economists expect full-year growth of 5%, according to surveys, after a strong first half of the year. Ankara expects a 5% growth this year and in 2023.

The median estimate of 13 economists in the Reuters poll for GDP growth in 2022 stood at 5%, in a range of 4.5% and 5.6%. Surveys by Bloomberg HT and AA see overall growth at 5.3% and 5.2%, respectively.

Economists expect growth to slow further in the fourth quarter.

"It seems it is still possible to attain the 5% growth target if there is no quarterly contraction of more than 0.5% in Q4," Haluk Bürümcekçi, of Bürümcekçi Consulting, said.

The head of one of the top business associations in Türkiye remained optimistic that the economy would still have a strong performance through the next year.

"We strongly believe that the Turkish economy will continue to rise on the shoulders of our industrialists in 2023 ... and in this context, the production, export and employment-oriented growth process of our national economy will continue in the upcoming period as well," said Mahmut Asmali, the head of the Independent Industrialists and Businessmen’s Association (MÜSIAD).

Türkiye ranked fourth just after Saudi Arabia, Indonesia and Mexico among the G-20 countries whose data have been announced, Asmalı noted.