Turkey grew, but still below 3% levels annually

Dünya Executive - - COMMENTARY - Alaatt n AKTAS Economist

The Turkish economy grew by 5.2% in the first quarter of the year and by 5.1% in second, therefore, total growth for the first six months was 5.14%. It’s a respectabl­e growth figure when compared to many countries – and we know the growth rate in the third quarter will be much stronger with the positive base effect due to the poor previous year. We may see 7% or even higher growth rates.

However, the high growth rates achieved in the last two quarters don’t contribute much in regards to income per capita. The biggest reason for that is the rise in for- eign exchange rates. GDP in terms of Turkish lira rose but as we divide lira-based GDP by foreign exchange, because of the highly depreciate­d lira, the dollar-based GDP seems to be stagnating and GDP per capita is sometimes even decreasing. On top of that there is a population rise and the GDP per capita falls much further with this increase, or at least stagnates.

The refugee issue is another problem. When you consider the refugees that Turkey feeds and who don’t contribute to the economy because they are not productive, GDP per capita falls much further.

Annual growth st ll around 3%

This aside, we also have another problem. The Turkish economy grew by 4.2% in the last quarter of 2016, 5.2% in the first quarter of this year and 5.1% in the second. These are respectabl­e growth rates. But, when we consider growth trends on an annual basis Turkey must face the fact that it still hasn’t surpassed 3% growth rate levels annually.

Even though GDP growth is considered on a quarterly basis and calendar year, it’s still possible to go beyond those limits. To be able to see the general trend one should observe the growth trend on an annual basis and we do so.

What exactly do we mean by “on an annual basis?” For example, let’s say that the second-quarter growth rate this year was 3.3% on an annual growth basis. Calculatin­g this figure, we consider the third and fourth quarters’ GDP growth rate of the previous year and the first and second quarters’ GDP growth rate of this year. We, of course, consider the volumes, not the rates. Thereby, we can compare the annual GDP size we calculated with the previous year’s GDP size. And the GDP size of the previous year includes the third and fourth quarters of 2015 and first two quarters of 2016.

So when we calculate the annual GDP increase through this method, GDP growth for the first quarter of the previous year was 6.3%. This rate started to fall thereafter. The second quarter of 2016 was 5.8% and regression became evident after the failed coup attempt on July 15 in the third quarter and fell to 4%. We closed the fourth quarter of 2016 (or the year) with 3.2%. The fast growth rate figures of this year have done too little to increase those annual growth rates. The annual GDP increase for the first and second quarters of this year was 3.3%.

Lowest rate for seven years

The data released by the Turkish Statistica­l Institute (TurkStat) is crystal clear. Our growth rate for the last three quarters on an annual basis is 3.2-3.3%. The last time we’ve seen a lower rate than this was at the end of the first quarter in 2010. Indeed, the annual growth rate in this period fell to 0.2%. Hence, let’s brag about the fast growth rate for the last two quarters but also keep in mind that this won’t bring us to the desired level of GDP growth rates on an annual basis.

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