GDP shrinks by 3.3 PCT, but showing strong signs of recovery

According to the data release, which calculates the GDP both based on the current prices method and by basing it on 1998 prices, Turkey continued to shrink in the third quarter of 2009 compared to the same period last year, making it the fourth quarter in a row that its GDP growth has dipped below zero.

The GDP shrunk by 3.3 percent calculated with 1998 prices as a base year, and 0.1 percent when using current prices. In the third quarter of 2008, the GDP grew by 1 percent compared to the year before. In the first nine months of this year, the GDP shrank by 8.4 percent to end at TL 7.96 billion calculated using current prices.

The data also considered GDP growth on a sectoral basis, with the construction sector taking the biggest hit during the third quarter, shrinking 18.1 percent. The construction sector shrunk almost half that amount in the third quarter of 2008, 9.8 percent. The sector shrank by 19.5 percent in the first nine months of the year.

The wholesale and retail trade sector, which shrank by 1.5 percent in the third quarter of 2008, continued to contract by 7.2 percent in third quarter of 2009. The share of taxes and subsidies in the GDP also shrank by 8.4 percent. Although many sectors experienced significant slowdowns during the third quarter, other sectors enjoyed great growth. The financial intermediation services sector grew by 9.5 percent compared to the same period of last year.

Government spending during the first three periods of the year increased, according to the release. Government spending was TL 20.9 billion in the first quarter, TL 23.3 billion in the second and TL 27.1 billion in the third quarter of 2009. The share of government consumption spending in total government spending increased from 9 percent to 9.7 percent in the third quarter.

Minister of Finance Mehmet Şimşek, speaking to journalists at the Gaziantep Journalists’ Association (GGC), noted that Turkey would start recovering much faster in the first quarter of 2010. Speaking about the current economic crisis, Şimşek stated that the crisis had significantly affected Turkey’s real sector, especially sectors focused on exports.

While noting that because of the crisis many investments were delayed, Şimşek said: “The economy hit the trough in March, during the first quarter. After the first quarter, however, there was a relative improvement in conditions. There are great signs that the last quarter of the year will be great. I’m not saying that ‘everything is just as it should be; we are on the path to sustained growth’ by just looking at one or two months of data, but there will be a noticeable improvement in conditions in the fourth quarter. Exports  and energy consumption are increasing. It will take time to return to the performance of 2007, however.”

Speaking on the performance of the banking sector, Şimşek noted that the macroeconomic foundation of Turkey is strong compared to the rest of the world. “The banking sector has a higher capital adequacy ratio than the West, and they will support us even more in the following months.” Şimşek also pointed to the decreasing and now single digit interest rates, saying this was a “big accomplishment for Turkey. …Turkey will exit the crisis much quicker from the first quarter of 2010 onward.” He also noted that the Organization for Economic Cooperation and Development (OECD) expects Turkey to grow by 6.7 percent annually from 2011 to 2017. Şimşek noted this growth rate is strong, coming close to China’s.

Independent Industrialists and Businessmen’s Association (MÜSİAD) President Ömer Cihad Vardan, speaking to journalists in Ankara, noted that the performance of Turkey’s GDP growth meant that Turkey was quickly exiting the economic crisis. Noting that the shrinking of the economy had slowed down from 14.7 percent to 3.3 percent in two quarters, Vardan said: “This shows that we are quickly overcoming a sharp dive in the growth rate. Our exit speed is great, and if it continues like this then in the last quarter we should see a growth rate of zero or even 1 percent.” Speaking on whether this meant an increase in employment in Turkey in 2010, Vardan noted that these figures were “rays of hope” in the betterment of employment in Turkey.