0407 GMT July 24, 2019
Gross domestic product expanded a seasonally adjusted 1.3 percent last quarter from the previous three months, when it declined 2.4 percent, according to data released on Friday, Bloomberg reported.
The median of 10 forecasts in a Bloomberg survey was for an increase of 1.3 percent. From a year earlier, GDP dropped 2.6 percent.
A continued recovery still hinges on the prospects for the lira, whose declines this quarter could spell trouble for an economy where consumer spending accounts for an estimated two-thirds of output.
Besides, it’s a risk for inflation, still stuck around 20 percent and preventing the central bank from cutting interest rates. A controversial rerun of Istanbul elections next month is also keeping the market on edge.
“The problem is there hasn’t been a normalization of economic policy, and the uncertainty regarding the election is delaying any form of long-term recovery,” Guillaume Tresca, a strategist at Credit Agricole SA in Paris, said before the data release.
A flurry of stimulus kicked in before March elections as lending by state banks powered gains in industrial production and retail sales. An economic turnaround in Europe, the main destination for Turkish exports, also offered a bright spot.
Credit grew for the first time since August’s market rout. Lending by state banks soared 30 percent to 1.09 trillion liras ($181 billion) last quarter, while loans extended by private banks rose five percent.
Still, early signs suggest the recovery may be losing traction. Consumer confidence dropped in May to the lowest level since record-keeping began in 2004.
Despite the possibility of a double-dip recession, the Turkish government is sticking with its growth target of 2.3 percent for 2019. By contrast, Goldman Sachs Group Inc. and Morgan Stanley have revised down their projections for this year and now envisage a GDP decline of 2.5 percent and 1.8 percent, respectively.
Tensions with the US rank high among the risks ahead for Turkey. President Recep Tayyip Erdogan has rebuffed American demands that Turkey delay the purchase of a Russian S-400 missile system as the days tick down to its possible delivery this summer.
Pushing ahead with the deal carries the threat of US sanctions that could plunge Turkey into renewed economic turmoil.
“For now we can focus only on the very short term, given the immense political risks around the S-400 purchase,” Inan Demir, an economist at Nomura International Plc in London said before the data.
“Early indicators for the second quarter point to another quarter of sequential contraction, while the outlook for the second half of the year will be dictated by geopolitical risks.”