Robust private sector gives Turkey fastest H1 growth worldwide
One of the engines of first half’s impressive growth was industrial production, which saw a 6.9 percent increase in July compared to the same month of 2010.
Turkey was the world's fastest growing economy in the first six months of this year, driven by intensive investments from the private sector, data from the Turkish Statistics Institute (TurkStat) revealed on Monday.
Turkey’s GDP grew by an impressive 10.2 percent in the first six months of the year, recording the world’s fastest growth. Turkey’s closest follower on the list of highest growths in first half was China with a 9.6 percent growth in its economy in the same period. Turkey owes its success to intensified investments by its dynamic private sector
Turkey's gross domestic product (GDP) clinched 8.8 percent growth in the April-June period of this year compared to the same months a year ago. The country was also the fastest growing economy in the first quarter of the year with 11.6 percent. The two quarters combined account for 10.2 percent growth for the first half compared to the same period of 2010, recording the world's fastest growth in the first half. China followed Turkey with a 9.6 percent growth in its economy in the same period.
TurkStat released its quarterly growth rates on Monday, indicating that the economy continued to grow for the seventh straight quarter. Turkey booked 11 percent growth in the previous quarter, marking the world's fastest growth in the given period. The government expects a growth rate of 6 percent for 2011. It earlier said that it maintained adherence to a “strong but modest” economic growth for this year. The Turkish economy suffered a 4.8 percent contraction in 2009, when global financial turbulence ravaged world economies. Thanks to strict adherence to a disciplined monetary policy, timely measures taken by the Central Bank of Turkey and intensive investments from the private sector, the economy was able to bounce back faster than foreseen from the 2009 crisis.
Turkey's GDP growth exceeds the earlier forecast rate of 7-7.5 percent for the second quarter while the total GDP in the given months amounted to $15.5 billion. Turkey also posted Europe's fastest growth in the second three-month period of the year. Observers attributed the strong growth performance to a dynamic private sector along with high domestic demand in the country. This year's first half, in fact, showed similarities with the growth model of last year, when the economic growth was led by private investments and domestic consumption. The private sector spent some TL 164.3 billion on new investments last year. Official data find that 91 percent of the country's 8.9 percent annual growth in 2010 was provided by the private sector.
The growth in private investments -- which has long been the driving force behind the economy's stable growth -- was 33.5 percent in second quarter compared to the same quarter of 2010, an impressive development. Private investments in Turkey increased by 6.7 percent in the second quarter over the preceding three months, making the largest contribution to the country's economic growth, a report released by Bahçeşehir University's Center for Economic and Social Research (BETAM) read. Likewise, private consumption increased by 9.2 percent in the second quarter compared to the same period of the preceding year. Private consumption increased only marginally by 0.1 percent in the second quarter over the preceding quarter. Public spending increased by 4.9 percent while public investments surged by 6.6 percent in the same period. These figures suggest that the government increased public investments, albeit slightly, ahead of June's general elections, the BETAM report argued.
Meanwhile, the İstanbul Stock Exchange (İMKB) index was down at the closing of the morning session on Monday. The benchmark dropped 119.81 points and closed at 55,084 points. One US dollar was traded at TL 1.78 while one euro bought TL 2.43 on Monday.
Gov't maintains high confidence in economy
Evaluating the growth indices in İstanbul on Monday, Science, Industry and Technology Minister Nihat Ergün said the figures “once again affirmed the Turkish economy's dynamism amidst global financial fluctuations.” According to Ergün, Turkey will see a growth rate of around 7 percent for 2011. “See, this is a controlled growth that we are seeing in our economy. … The engine of this growth is the private sector and the government will support such a growth type,” he explained. The minister added that Turks should be careful with their expenditures and not spend more than they can afford. Recalling that the International Monetary Fund (IMF) estimated a 2.5 percent growth for Turkey for the year 2012, Ergün said the government is confident the country will “easily” exceed this figure.
The other major factor observers attributed the higher-than-expected growth to in the second quarter was the strong performance in the construction, trade, transportation and financial sectors. Foreign investments are another factor contributing to a healthy and stable growth of Turkey's economy. The total foreign direct investment (FDI) to Turkey in the first half of the year was $6.2 billion, a robust rise of 338.5 percent compared to the same months of 2010, recent data from the central bank have revealed. Observers say the major reason for foreigners pouring their money into Turkish markets is the country's strong finance sector.
Turkey continues on its path to maintain a long-running strong growth performance, Economy Minister Zafer Çağlayan communicated via a written statement on Monday. Recalling that following an 11.6 percent growth in the first quarter, Turkey's economic growth in the first half amounted to 10.2 percent, the minister said the current indices suggest an even higher than 7 percent growth for 2011. “The latest industrial production and capacity utilization figures actually foretold such growth in the second quarter. … We should also not forget the strong exports performance,” he said.
Making mention of a widening current account deficit (CAD), which has become a serious structural problem for the country, the minister said the government expected to “tame the CAD” in the months to follow. Underlining that the government acknowledges the CAD is a real risk and had never ignored this fact, Çağlayan said he has faith that measures implemented by both the central bank and the government “should have their impact in the medium term.”
Unions laud strong economic performance
Turkish Confederation of Businessmen and Industrialists (TUSKON) Chairman Rızanur Meral said in İstanbul on Monday that the latest figures once again acknowledge the dynamism of the Turkish economy, injecting confidence into the markets. “It is encouraging for us to see that the share of domestic production in growth is on the rise. … This is good news for the future course of our economy,” he opined.
Also evaluating the figures, Independent Industrialists and Businessmen's Association (MÜSİAD) Chairman Ömer Cihad Vardan told Today's Zaman in a written statement that they were happy to see that Turkey has managed to become the world's fastest growing economy in the first half. “Despite the current fluctuations in global markets and stagnation, particularly in the surrounding economies, Turkey maintained its unique growth performance. … It is also encouraging to see that the private sector continued to be the main engine of Turkey's economic growth.” Vardan said current foreign exchange rates will help domestic production to substitute relatively more for imports. He highlighted that international rating agencies should consider increasing Turkey's ratings following the latest indices.
Underlining the contribution of exports to Turkish economic growth, Turkish Exporters Assembly (TİM) Chairman Mehmet Büyükekşi said a 19 percent growth in exports in the second quarter compared to the same months of 2010 was a direct sign of this. “We should highlight the fact that our exporters have been putting their hearts and souls in diversifying Turkey's exports markets during a period in which most of our trade partners are struggling with both political and financial problems,” he added.
In separate remarks on Monday, Ankara Chamber of Commerce (ATO) President Salih Bezci said the government “should be given credit” for having encouraged the private sector to engage in new investments. “The government has cleared the road for Turkish entrepreneurs to make new, large-scale investments and to diversify investment tools. … New investments, particularly in construction, retail trade, transportation and communication, were the backbone of private expansion,” he added.