This growth performance underlines a 25th quarter of uninterrupted growth since the last quarter of 2001.The quarterly growth rises come on the back of the significant performance of the manufacturing industry, which has shown annual growth of 7 percent. This constituted almost 27 percent of the overall quarterly growth.
The agriculture sector posted an annual increase of 5.6 percent in the first quarter. However as the share of the agricultural sector in overall GDP has been declining for the last five years, to almost 9 percent, the contribution of agriculture to the growth is limited to 0.2 percentage points. Although it is too early to call the end of adverse weather conditions, agricultural performance can be expected to be stronger this year. Despite this expected improvement in the agricultural sector, there may not be a positive development in food prices throughout the year.
On the demand side, private as well as public consumption is rising. This finding will empower the Central Bank of Turkey in its contractionary monetary policy. As a positive factor, the rate of growth in gross capital formation is quite robust and in this rise, public sector capital goods investment is higher than that of the private sector. While export performance continues to rise, so does import performance. Still, it should be noted that quarterly export performance is the highest since the beginning of this year. Yet the contribution of net exports is negative, standing at some 0.5 percentage points. Under current conditions it can be expected that despite strong export performance the contribution of net exports will be negative in 2008.
Two forecasts can be made after this first quarter data: Despite global financial and energy crises and domestic inflationary, current account and political pressures, the overall GDP growth rate will reach somewhere around 4.5 percent, which is quite acceptable under the given conditions. However as a reaction to the tightening monetary policy, the growth rate will slow in the second half of the year. Despite this possibility, the right, proactive governmental fiscal stance would neutralize the negative repercussions of tight monetary policy.
Finally, despite increasing private consumption figures in the first quarter, the trend will be moderate in the period ahead. Therefore it is unlikely that there will be demand pressure risk on the inflation front.
It seems that coming growth trends will be determined by external energy and financial developments and by the domestic political situation.
