Türkiye’s economy is forecast to have grown in the second quarter of the year, propelled by fiscal stimulus ahead of the May elections and recovery after devastating February earthquakes, according to surveys.
The data due on Thursday is expected to show a gross domestic product (GDP) growth of around 3.5% for the April-June period, according to the median estimate in a Reuters poll of 12 economists, with forecasts ranging between 1% and 8%.
A survey by private broadcaster Bloomberg HT and Anadolu Agency (AA) sees the expansion at 4% and 3.3%, respectively. Forecasts varied from as low as 1.2% to as high as 5.3%.
Until the election, Türkiye’s central bank had implemented a long-running low-rates policy as the government prioritized growth, exports and investment to tackle the chronic current account deficit and bring stubborn inflation down.
Those cheap borrowing costs, as well as fiscal stimulus ahead of the vote, are expected to have supported growth in the second quarter.
Sharply tighter monetary policy after the election is expected to lead to a slowdown in the remainder of 2023.
Economic activity in the first quarter was affected by massive earthquakes that hit the country's south and southeast, killing more than 50,000. Reconstruction efforts are expected to cost more than $100 billion.
Goldman Sachs said growth in the second quarter accelerated mainly due to preelection fiscal stimulus and the recovery after the earthquakes. It said household consumption remained strong, while growth in industrial production and exports weakened in that period.
The government reversed its economic policies after President Recep Tayyip Erdoğan extended his rule into a third decade by winning the presidential election.
The central bank has since tightened its policy rate by 1,650 basis points, which is expected to impact growth in the coming quarters. Ankara has also hiked various tax rates, which is expected to have an inflationary effect.
The annual inflation, which subsequently eased to as low as 38.21% in June, rose again to nearly 48% last month due to the Turkish lira’s decline and the tax hikes.
Officials have acknowledged it would rise further toward the year-end. Inflation had leaped to a 25-year high above 85% last October.
The median estimate of 20 economists for growth in 2023 stood at 2.9% in the Reuters poll, with forecasts between 1.7% and 4.5%.
Forecasts in Bloomberg HT and AA surveys stood at 3.7% and 3.67%, respectively. Expectations in both surveys ranged from 2.4% to 4.5%.
Türkiye’s economy bounced back strongly from the COVID-19 pandemic and grew 5.6% in 2022, extending its hot streak of 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 the year.
The economy beat forecasts and expanded by 4% in the first quarter of this year, driven by the increase in public investments before the earthquakes and the election and robust demand.