From Staff Reports
By most standards, 3.9% GNP growth is pretty good. But not for Turkey, where the second quarter figure is down from 6.9% in the previous quarter, marking its slowest growth since Q1 2002.
Turkey’s economy has enjoyed five-straight years of growth. In 2005, Turkey’s economy grew at a 7.4% clip. In 2006, growth was 6%. Its central bank has been struggling to contain inflation, evidenced last year when it raised interest rates by 4.25 percentage points to 17.5%, good for the highest rates in Europe.
“Consumer demand was low, which confirms the central bank’s expectation of a slowdown,” Haluk Burumcekci, chief economist at Fortis Bank AS in Istanbul, said to Bloomberg News. “Today’s figures are supportive of a central bank cut in interest rates.”
It’s not the case of Turkey’s economy struggling, rather it’s equalizing. Keeping the interest rates so high will eventually bring the economy down. The 47% second-quarter jump in public-sector construction reinforces that.
“Public spending has increased through projects that were accelerated or carried out ahead of plan,” Burumcekci said. “That’s helping to support growth before the elections, although that may turn negative in the second half if they cut spending to compensate.”