Turkey’s annual economic growth for 2Q22 is 7.3 percent led by consumer spending and exports.
The growth rate beat economists’ expectations – polls by Reuters and Bloomberg had estimated an expansion of between 7.1 percent and 7.2 percent. On a quarter-on-quarter basis, gross domestic product grew by 1.2 percent, as per the official figures.
Consumption by households soared by an annual 19.5 percent in the first quarter after the central bank cut interest rates to 14 percent from 19 percent late last year. The corresponding spike in annual inflation from 19% in November 2021 to 60% by the end of first quarter urges consumers to spend as the prices of goods and services keep rising.
Exports increased by 16.8 percent helped by a cheaper lira – the currency lost 44 percent of its value against the dollar in 2021.
Losses for the lira meant Turkey’s annual GDP in dollar terms contracted to $793.8 billion at current prices from $803 billion in the 12 months to December last year. The economy expanded by 11 percent in 2021.
In terms of industries, GDP expanded the most in banking and insurance, growing by 24.2 percent from a year earlier as the loan rates are less than half of the annual inflation. .As the loan rates hover at 30% the annual current CPI inflation is at 70%.
The coming quarters will show a slowing domestic demand as inflation is biting off from the purchasing power. From 7.3% annual growth recorded in 1Q22, whole year GDP growth expectations stand at 3-3,5% range. Accompanying is a very high inflation heading to triple digits, a current accoation rate heading to 6% of GDP and budget deficit set to reach 5-5.5% of GDP.