The Turkish Statistics Institute (TurkStat) announced quarterly economic growth figures Monday. Its data proved a hard landing -- an immediate stop of economic growth coupled with high inflation -- scenario is far from a reality in the country. “We can speak of an expected and also a desired deceleration here,” said Şengül Dağdeviren, chief economist for Dutch bank ING's operations in Turkey.
The 3.2 percent economic growth attained in the January-March period was the lowest rate Turkey saw in a quarter since the final quarter in 2009, when its economy started rebounding from the immediate impact of the global financial crisis. Yet it stands solid enough at a time when the EU, its main trading partner, anticipates poor growth, if not none at all, this year.
The Turkish economy grew by nearly 7 percent on average each year for the six years between 2002 and 2008 but could not remain unaffected when financial turmoil with global consequences erupted with the mortgage crisis in the US. Turkey's economic growth ground to a halt in 2008, only to be replaced by a contraction of some 5 percent for the whole year in 2009. Quickly weathering the storm thanks to its robust financial sector and powerful domestic market, however, it started posting high growth rates in last three months of the year. The national GDP expanded by some 9 percent in 2010 and by another 8.5 percent last year. Accompanying such profound economic growth were a widening current account deficit (CAD) and two-digit consumer inflation, which led some observers to discuss a hard landing as a scenario for the Turkish economy in 2012.
The announcement of 3.2 percent rate of economic growth for the first quarter added to the good news related to the CAD and inflation, both of which seem to have been tamed by appropriate fiscal and monetary policies. According to the Central Bank of Turkey, the country's CAD dropped by more than a quarter to $21 billion in the first four months of 2012, compared to nearly $30 billion during the same period in 2011. The figures led Economy Minister Zafer Çağlayan to pronounce the CAD issue dead. “We told you we were going to beat the CAD in Turkey. The data show that this issue is over,” he told a press conference in İstanbul on June 11.
Turkey's main trading partner is the EU, but its commercial links elsewhere have substantially improved, particularly in the Middle East and Africa. But because its economy is highly dependent on foreign supplies in the area of energy, any appreciation of the dollar against the euro, which also pushes down the value of the Turkish lira against the greenback, increases its energy bill. It also causes the national economy to produce a larger foreign trade (FT) deficit. With improving terms of trade, however, the Turkish FT deficit dropped by about one-fifth, to $27 billion, this year, from $33.75 billion in the same period last year.
Likewise, according to TurkStat, consumer inflation declined to 8.2 percent from 11.1 percent in April, hitting the single-digit level for the first time since December of last year. Downward trends in international oil and gold prices as well as durable consumer goods have contributed to this sudden decline.
2023 goal far-fetched?
The 3.2 percent economic growth for the first quarter, however, put the government in a difficult spot as it wants to make Turkey one of the 10 largest economies in the world by 2023, the centennial of the foundation of the modern republic. Turkey is now the world's 16th-largest economy, with a $770 billion GDP at the end of last year.
The government foresees a 4 percent rate of economic growth for the whole year in 2012 and a 5 percent rate for the next and the following years in its Medium-Term Economic Program (OVP). Starting this year, a 5 percent rate of economic growth per year on average will bring Turkey's GDP up to just over $1.3 trillion by the beginning of 2023. Even with such a performance, Ankara's goal will be a long shot since Canada, the world's 10th largest economy today, had a GDP of some $1.73 trillion at the end of last year. To reach a total GDP of, say, some $2 trillion -- which would put the country on a better footing to meet the 2023 goal -- by its 100th anniversary, the Turkish economy grow by around 9 percent every year for 11 years from this year on.
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Source : todayszaman.com
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