Turkey’s economy grew at a faster pace than anticipated during the last quarter of 2016, since households boosted spending.
Gross domestic product (GDP) expanded 3.5% in the October-to-December period, faster than all estimates in a Bloomberg survey of economists, which saw an expansion of 1.9%.
Turkish households and the government boosted spending after July’s attempted military takeover. Private demand picked up in the final quarter of 2016, fueled by household spending on everything from services to consumption goods. Based on strengthening consumer sentiment, it will probably increase at similar levels this year, while public spending emerges as an even bigger driver of growth, according to William Jackson, a London-based economist at Capital Economic, "Government consumption could strengthen if fiscal policy is loosened further,” Jackson said, revising up his 2017 growth forecast to 2.5 percent from 1.8 percent previously. He continued, “The drivers of growth are likely to shift and investment should continue to pick up from last year’s slump.”
The Turkish government adopted a series of expansionary fiscal policies to counter the slowdown, which may add as much as one percentage point to the budget deficit by year-end, according to Finance Minister Mr. Naci Agbal. Incentives to boost employment and agricultural production, and tax breaks for the tourism industry, were among stimulus measures rolled out. He said government measures to ease restrictions on household demand usually have an effect with some delay, meaning faster consumption growth in 2017.
It was important for Turkey not to enter a “technical recession,” Deputy Prime Minister Mr. Mehmet Simsek said in a televised interview after the GDP report. The minister said “There’s a moderate recovery in growth in the first quarter of 2017. The recovery will accelerate from the middle of the second quarter.”
