The economy of Turkey bounces back from COVID-19

TURKEY’S economy rebounded from the summer shock of the coronavirus pandemic, registering growth of 6.7 per cent year-on-year in the third quarter, government data showed on Monday.

The data reported by the Turkish Statistical Institute (TurkStat) exceeded the expectations of analysts, who had forecast a recovery of 4.8 per cent.

The information and communication sector was up 15 per cent, while industry saw an 8-per-cent rise and activities in construction increased by 6.4 per cent, according to TurkStat.

Meanwhile, financial and insurance activities rose by 41 per cent in the third quarter.

Turkey reported its first coronavirus case in March and was quick to suspend economic activity, close its borders and halt transportation, impacting trade and tourism.

Turkey’s authorities responded to the pandemic by cutting the country’s already low interest rates and pumping the economy with cheap credit. Loan growth reached its highest level since 2013.

It subsequently shut down public entertainment venues and demand was further dampened by domestic travel bans. The economy shrank by 9.9 per cent in the previous quarter.

However, the outlook for the fourth quarter is bleak as the country grapples with an alarming surge in coronavirus cases, after the government changed the way it reports daily infections.

The number of cases has quadrupled with the health authorities now including asymptomatic cases in its tally for the first time.

This month, the central bank hiked the benchmark interest rate to 15 per cent in order to rein in the plummeting lira and battle inflation. Such rate increases usually put a brake on economic development.

At the start of November, president Recep Tayyip Erdogan sacked the central bank governor. His replacement raised the bank’s benchmark interest rate in an effort to halt the currency’s downward spiral, a move that is expected to tame domestic demand and lead to slower growth in the final months of this year.