Istanbul, buildings in Galata

Turkish economy grew at 6.7% in 3rd quarter of 2020

Turkish economy grew faster than that of China and the G-20, while the US and the EU are experiencing a recession.

Turkish economy performed much better than expected during the third quarter of the year and grew at 6.7% between July and September 2020, well above market forecasts, while economists highlight the good figure for Turkish GDP, which despite the coronavirus pandemic grew faster than other economies such as China, while Europe and the United States entered recession.

According to data released on Monday by the Turkish Statistical Institute (TÜİK), Turkey’s GDP grew 6.7% in the third quarter compared to the same period in 2019, largely due to fiscal stimulus from the government and the end of restrictions due to the COVID-19 pandemic, which led the Turkish economy to a negative growth of 9.9% in the second quarter.

Activity in the financial sector in Turkey grew by 41.1% during the third quarter, ICT by 15%, industry by 8%, construction by 6.4%, and agriculture by 6.2%, according to TÜİK data; however, the added value of the services sector, which has suffered the greatest impact from the pandemic, grew by just 0.8%.

The public spending of the Turkish state grew by 1.1% between July and September, while the gross fixed capital formation, which measures the investments in fixed assets by companies, increased by 22.5% in the third quarter.

On the other hand, spending by Turkish households increased 9.2% in the third quarter of 2020 compared to last year, while exports fell 22% – although they had fallen 36% in the previous quarter – and imports increased by 16% (in the 2nd quarter they had fallen by 8%).

Higher growth than expected by experts

The growth experienced by the Turkish economy in the third quarter has been much higher than the markets expected and has surprised analysts and economists; a median of estimates of 14 economists made by Reuters had shown Turkish GDP growth in the third quarter to be around 4.8%, while similar studies carried out for Bloomberg and the Anatolia news agency had forecast a similar growth of 4,8% and 5%, respectively.

Referring to these figures, Turkey’s new Minister of Economy, Lütfi Elvan, highlighted the increase in domestic demand as the main driver of the economy in the third quarter. “We are not unaware that there may be risks,” acknowledged Elvan, who pointed out however that Turkey seeks sustainable economic growth based on prioritising financial stability and reducing inflation.

The growth of the Turkish economy in the third quarter has outpaced that of all the G20 member countries, including China, whose GDP grew 4.9% between July and September. In contrast, the GDP of the Eurozone contracted by 4.4% in the third quarter, that of the United States by 2.9%; growth was also negative in countries such as France (-3.9%), Germany (-4 %) or the United Kingdom (-9.7%).