Services save the day
The Turkish economy grew by 1.6 percent in the third quarter this year. As a result, the growth rate for the year, which was 6.2 percent over the first two quarters, fell to 4.5 percent, compared to 5.2 percent over the first three quarters of last year.
Small though it was, the third quarter rate was still surprisingly high. With industrial production the most decisive factor in GDP – expected to increase by only 0.5 percent in the third quarter, people assumed that GDP growth would also remain around that level. In fact, the growth of the industrial sector was only 0.3 percent. However, the total growth in GDP reached 1.6 percent.
Here we see the magic touch of the services industry. A decline of 5.3 percent was recorded in the construction sector while agriculture saw an increase of one percent (though small, still surpassing estimates). On the other hand, the value added of the services sector, which consists of trade, transportation, accommodation and food services, increased by 4.5 percent. So, third quarter GDP, which was expected to be low due to the poor performance of industry, agriculture and construction, has reached 1.6 percent because of the 4.5 percent growth in the services sector.
Industrial production is naturally the main determinant of the industrial sector in terms of GDP. The industry sector also normally determines the path of total GDP. It has been the same so far this year. But if the growth in services had been zero, the total growth in the third quarter would have been 0.6 percent.
3.8 percent s now a dream
This year’s growth rate in the new economy program is estimated at 3.8 percent. After the release of the third quarter data, we can now say that it will obviously not be possible to reach that forecast. Although the economy was relatively better in the third quarter compared to the previous quarter, growth remained low. In order to close the year at 3.8 percent, we need to grow by 1.9 percent in the last quarter. That appears to be impossible. The leading indicators suggest that the Turkish economy will shrink in the last quarter. We do not know the rate of the downsizing though but even a growth rate of zero in the last quarter should be considered a great success. If that is the case, the annual growth rate will be 3.3 percent. However, there is a stronger possibility of a three percent contraction in the last quarter, and thus the annual growth rate will be 2.5 percent.
What g ves n agr culture?
Here’s a bit of a contradiction: The agricultural sector grew by one percent in the third quarter this year and by 0.7 percent in the first three quarters. But interestingly, the production forecast of TurkStat points to a decline, not an increase, in the production estimate. TurkStat predicts that this year’s production will decline by 4.2 percent in grain and other herbal products, three percent in vegetables and 1.7 percent in fruits. Growth in terms of GDP on one side, production decline forecast on the other!