The domestic increase in demand for goods and services helped the Turkish economy to grow by nearly 9 percent per year between 2010 and 2011.
Delayed consumption was experienced due to a global financial crisis in previous years and easily accessible bank loans. Domestic demand boomed, causing a strong increase in imports and domestic spending and hence current account deficit (CAD). However, some radical policies by the Central Bank of Turkey coupled with other supervisory institutions helped control the growth and minimized CAD to reasonable levels in 2012.
One of the main objective of the central bank during the second half of 2012 and the first half of 2013 was to control the increase in bank loans and in savings to control the CAD. This was partially achieved with a reduced growth rate in 2012. Since last summer, the central bank and the government noticed a deterioration in consumer confidence and decreasing spending and therefore started providing liquidity to the markets to stimulate the economy. A 3.2 percent growth for 2012 is a reasonably well-achieved rate when compared to the average international market growth. We are still below the 5 percent level which Turkey needs before it can provide more jobs for its young population.
The central bank has already started to ease its monetary policy to spur on growth in the Turkish economy without losing the gains of 2012. However, Turkey needs growth through structural reforms in the economy and strong political will. We have enough reasons to convince us that a higher growth level will be achieved in 2013. The especially recent and successful privatization of state assets, a countrywide urban renewal project along with expectations for new credit upgrades by international credit agencies are all stories that will be shaped in 2013.
The central bank's recent strategy to control bank loan growth shows its impact on consumer behavior. Recent data show that food and alcoholic beverages -- the largest component of domestic consumption items -- account approximately for 27 percent of domestic consumption while transportation and communication accounts for 17 percent. Housing and utilities comprise 11 percent and furniture and household appliances and maintenance occupy 12 percent of domestic consumption, respectively. Clothing and shoes were the next largest categories; they account for 5 percent of domestic consumption. The share of almost all the categories of domestic consumption elements mentioned above declined from 2011 to 2012 except for food. Expenditures on cultural, social, hotel and related service sector expenditures are the only ones with a share increase from 2011 to 2012.
This could be a clear result of the changing nature of the emerging classes of society. We expect to see the same trends and outcomes repeated in the coming years. There were some sectors that benefited a strong domestic demand and loan growth in 2010 and 2011. Starting from the third quarter of 2010, the construction permits constantly increased and exceeded the number of apartments sold in each following quarter. Finally, the first half of this year showed record levels for construction permits, reaching 550,000 while only 400,000 sold in the same quarter.
Housing loans reached all-time highs by mid-2011. Later, there was a sharp decline in the growth of housing loans and we started to see the effects of this in the real estate market. There is enough demand in the housing sector -- that was one of the driving forces of growth in 2011 and 2012 -- that next year we could see the market confidence and domestic loans recover. Nevertheless, the housing market is fragile, and has to be monitored closely. As a consequence of this development, some cities may see declines in housing prices.
We observed a sharp decline in demand for automobiles in early 2012 contrary to a relatively stronger demand in 2010 and 2011.
However, the trend in the demand for automobiles began to increase starting from the third quarter of 2012, signaling reasonably well a recovery for the sector. The recovery is steadily taking place and that is why we are more optimistic about the economic growth in Turkey in the final quarter of 2012 and for 2013, and also in general as well.