Turkey re­jigs GDP es­ti­mates as out­put falls 1.8% in 2016 Change un­likely to stem frus­tra­tion about econ­omy

Kuwait Times - - BUSINESS -

On pa­per at least, 79 mil­lion Turks got a near 20 per­cent boost to their av­er­age stan­dard of liv­ing yes­ter­day when the gov­ern­ment re­jigged GDP cal­cu­la­tions, a change un­likely to stem frus­tra­tion about an econ­omy now in con­trac­tion.

Turkey, which re­stated its gross do­mes­tic prod­uct (GDP) data to meet the stan­dards of the Euro­pean Union it aims to join, also said third quar­ter out­put fell a big­ger-than-ex­pected 1.8 per­cent year-on-year, the first de­cline in seven years. Once one of the world’s most promis­ing emerg­ing mar­kets, Turkey has been hit by se­cu­rity fears af­ter a se­ries of bomb­ings, the most re­cent on Satur­day, and a failed coup in July. Author­i­ties have since de­tained, jailed or dis­missed more than 100,000 peo­ple in a crack­down that has wor­ried in­vestors and sent the lira cur­rency to a record low.

“Th­ese re­vi­sions make some of Turkey’s macroe­co­nomic vari­ables look health­ier,” Wil­liam Jackson of Cap­i­tal Eco­nomics in Lon­don said in e-mailed com­ments. “But th­ese don’t change any­thing on the ground: The lira has been one of the most vul­ner­a­ble (emerg­ing mar­ket) cur­ren­cies to shocks and the econ­omy still has a pro­duc­tiv­ity prob­lem.”

The Turk­ish Sta­tis­ti­cal In­sti­tute said that 2015 GDP stood at $861 bil­lion, from $720 bil­lion be­fore the re­vi­sion - ad­ding $141 bil­lion to the size of the econ­omy vir­tu­ally overnight. Per capita in­come, of­ten used as a proxy for stan­dard of liv­ing, was es­ti­mated at $11,014 from $9,257 pre­vi­ously.

That boost in pa­per wealth may mean lit­tle to Turks who have seen their buy­ing power eroded by the lira’s dou­ble-digit de­cline this year. How­ever, it may come in handy for Pres­i­dent Tayyip Er­do­gan as he cam­paigns for an ex­ec­u­tive pres­i­den­tial sys­tem, which is ex­pected to go to a ref­er­en­dum by May.

Er­do­gan and the AK Party he founded have long re­lied on their suc­cess­ful stew­ard­ship of the econ­omy - in­clud­ing years of rapid growth, new jobs and vast spend­ing on air­ports, hos­pi­tals and hous­ing - to win voter loy­alty. While that rep­u­ta­tion could be threat­ened by re­cent eco­nomic weak­ness, the re­jigged GDP num­bers are un­de­ni­ably pos­i­tive for the AK Party. An­a­lysts at BBVA not­ing that growth over the pre­vi­ous 17 years now av­er­ages 5.1 per­cent, rather than 3.9 per­cent.

The 1.8 per­cent de­cline in third-quar­ter GDP far out­stripped the 0.5 per­cent drop fore­cast in a Reuters poll, which did not take into ac­count the re­vi­sions. The econ­omy weak­ened as a dou­bledigit jump in pub­lic con­sump­tion failed to off­set a de­cline in pri­vate do­mes­tic de­mand, the data showed.

Still, an­a­lysts re­main wor­ried about the weak­ness in the lira, as Er­do­gan’s drive for lower bor­row­ing costs gives the cen­tral bank lit­tle room to hike. “The lira has been in freefall since the end of Septem­ber, the cen­tral bank’s rate hikes have proved woe­fully in­ef­fec­tive and, per­haps most wor­ry­ingly, the econ­omy is now con­tract­ing sharply, fu­elling pop­ulist and na­tion­al­ist sen­ti­ment and mak­ing it very dif­fi­cult for the cen­tral bank to raise rates,” said Nicholas Spiro, of Lau­ressa Ad­vi­sory in Lon­don. —Reuters

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