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Turkey’s first-quarter growth raises bar for year-end forecasts

Economy’s more-than-expected %7 growth rate in first quarter raises bar for year-end projections, say economists

As the Turkish economy’s first-quarter growth data came out better than expected, economists state this may open the door to an upward revision to their year-end growth forecasts, considering the base effect.

According to the country’s statistical authority on Monday, Turkey’s economy expanded 7% year-on-year in the first quarter of 2021 amid economic fallout from the coronavirus pandemic.

The figure was well above market expectations as a panel of 16 economists surveyed by the Anadolu Agency on Friday had estimated the Turkish economy would expand by 6.4% on average in the same period, in the January-March period, hovering between 5% and 7.2%.

The country’s gross domestic product (GDP) at current prices increased 29.1% to 1.4 trillion Turkish liras ($188.6 billion) in the first quarter of the year, the Turkish Statistical Institute (TurkStat) said.

Double-digit growth expected for Q2

“In the second quarter, even if there is a contraction compared to the previous quarter, there will be a double-digit growth of nearly 20% due to the base effect created by the first wave of the epidemic,” said Haluk Burumcekci, economist and financial analyst at Anadolu Agency.

The industry and service sector increased the national income in the first quarter, he said, adding private consumption expenditures, investments and net foreign demand also contributed positively to growth.

“The strong course in the first quarter raised the bar for growth,” he said, adding the historically high levels reached in both the industrial production index and the national income series show that even if there is a loss of momentum in the rest of the year, the growth will still maintain its strength compared to the same period in 2020.

Also commenting on the data Kerem Alkin, permanent representative of Turkey to the OECD, said he forecasted the economy would grow 5.8% under the worst-case scenario.

“When we look at it today, in a conjuncture where the Eurozone contracted by 1.8% in the first quarter of 2021, Turkey’s 7% growth is a privilege,” he said.

He also underlined the positive growth performance of China and Turkey distinguishes the two countries positively, adding, “it is noteworthy that Turkey among other OECD countries ended 2020 as the only one that grows positively, and on top of that, high growth continues strongly in 2021.”

Meanwhile, Alvaro Ortiz Vidal-Abarca, the chief economist for Turkey at Spanish-based BBVA bank, said on Twitter: “Turkey’s GDP grows at 7.0% in Q1 and stays near 23% in the second quarter.”

“The data remind us that GDP will grow near or above 6% in 2021 and that controlling Inflation, not growth, should be the priority this year. Only by this will guarantee sustainable growth in 2022.”

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