Türkiye’s economy expanded by a more-than-expected 5.9% year-over-year in the third quarter, driven primarily by solid household spending, the official data showed Thursday.

The country’s gross domestic product (GDP) thus grew slightly above the market expectations, hovering around 5.6%, data by the Turkish Statistical Institute (TurkStat) showed.

"As envisaged in our program, we are moving toward a more balanced composition in growth," Treasury and Finance Minister Mehmet Şimşek said as he commented on the figures.

"Compared to the first half of the year, the contributions of domestic demand to growth fell, while the negative contribution of net exports decreased relatively," he noted in a post on social media platform X.

Echoing the latest data, Şimşek, in a televised interview later on Thursday, reiterated the growth remains "strong." Despite the possibility of slowing down in the coming period, he said the GDP data stands in line with predictions in the medium-term program for 2023.

"Growth is strong on one hand; of course, this is meaningful and encouraging. But what is important here is to increase the quality of growth. The goal of our medium-term program is to achieve our goals in terms of quality," he maintained.

He also recalled their top priority is establishing disinflation, highlighting the most important element of the new program unveiled in September: ensuring price stability.

"What we mean by price stability is to reduce inflation and keep it at single digits. Our goal here is to keep inflation under control this year. To reduce it to 34% by the end of next year, then to reduce it to single digits at the end of 2025 and 2026," he said.

"Reducing the budget deficit to below 3% as a result of the medium-term program is also an important target. Another goal is to rebalance growth, which will reduce the current account deficit and help us control inflation. In other words, maintaining domestic demand at a reasonable level while supporting net exports," he said, stressing the need for the balance.

In addition, he also highlighted the importance of increasing international reserves and the goal of gradually exiting from the FX-protected scheme, also known as KKM.

"We started our work toward this. We are making progress in reducing exchange rate hedges," he said. "We may take additional steps in this regard in the coming period."

Şimşek also highlighted the positive impacts of policies implemented, referring to the some indicators, such as a decrease in the country’s risk premium.

"The medium-term program is working. The program has internal consistency and reliability. Trust and belief in the program abroad and at home is increasing," he said.

Third quarter growth

"Gross domestic product (GDP) increased by 79.8% and reached TL 7.68 trillion ($295.8 billion) at current prices this July-September," TurkStat said in its latest report.

GDP grew 0.3% from the previous quarter on a seasonally and calendar-adjusted basis, the data showed.

The construction sector made the highest contribution to the economy with an 8.1% rise, followed by 5.7% in the industry sector and 5.1% in the financial and insurance sector, TurkStat said.

Meanwhile, the value added in service activities increased by 4.3%, public administration education, human health and social work activities by 3.6%, and real estate activities by 2.7%, respectively.

On the other hand, the agriculture sector grew by only 0.3%; the data partially reflected fallout and rebuilding after this year’s devastating earthquakes in the southeast.

TurkStat said that over the same period, the final consumption expenditures of resident households rose 11.2%, government final consumption expenditures rose 5.3%, and gross fixed capital formation rose 14.7%.

Imports of goods and services soared 14.5% in the third quarter of 2023 compared to the same quarter year earlier, while exports of goods and services climbed 1.1% year-on-year in the third quarter.

In a Reuters poll, the economy was forecast to have expanded 5.6% annually in the third quarter before a slowdown due to interest rate hikes since June. Since June, the Central Bank of the Republic of Türkiye (CBRT) embarked on a 3,150-basis-point tightening cycle, including hikes of 500 basis points in the last three months.

A poll of 18 institutions by private broadcaster Bloomberg HT estimated growth between 4.1% and 6.1%, with a median of 5.5%.

Meanwhile, economists in an Anadolu Agency (AA) survey expected to see the expansion at 5.19%, with forecasts ranging between 4.1% and 6%.

The data also showed that growth in the second quarter was revised to 3.9% from 3.8%.

However, analysts predict a sharply tighter monetary policy after the election could lead to an economic slowdown next year.

In its latest report on Wednesday, the Organisation for Economic Co-operation and Development (OECD) upgraded its growth forecasts for Türkiye for 2023 to 4.5%, up from 4.3%.

It sees the growth slowing to 2.9% in 2024 and 3.2% in 2025.

Following elections, authorities have tightened monetary policy to cool demand and rein in inflation, which is around 61% and is expected to climb until May before dipping.

The Treasury Ministry pledged on Thursday that such policies would continue until both inflation and the current account deficit decline permanently, adding that the economy was on track toward balanced growth.

"We will continue to implement our predictable, rule-based policies until inflation and the current account deficit fall permanently and macro-financial stability is achieved," Şimşek said on X.

"We will implement structural reforms to increase productivity. Thus, we will strengthen the foundations of sustainable high growth," he vowed.

Stating that the Turkish economy maintained its high-rate growth performance for 13 uninterrupted quarters with a GDP increase of 5.9% in the said period, Trade Minister Ömer Bolat said, "Türkiye has become the fastest growing economy among the G-20 and OECD countries, whose data was announced in the third quarter."

"Our exports of goods and services increased by 1.1% despite the earthquake and weak foreign demand. In investments, there was the strongest increase in the last two years with 14.7%, due to the impact of machinery and equipment investments, while the contribution of investment expenditures was 3.4 points."