Country Report Turkey January 2011

Economic performance: GDP growth slows to 5.5% year on year in the third quarter

GDP grew by 5.5% year on year in the third quarter of 2010-down from 11.8% and 10.2%, respectively, in the first two quarters. For January-September, GDP was 9.8% higher than a year earlier. The lower year-on-year growth rate in the third quarter compared with preceding quarters is largely the result of a base effect: by the third quarter of 2009, the worst of the 2008-09 recession was over. In quarter-on-quarter terms, GDP grew by a calendar- and seasonally adjusted 1.1% in the third quarter of 2010, down from 3.7% in the second quarter, but higher than 0.4% in the first quarter. As of the third quarter, GDP was back above the pre-crisis level reached in the first quarter of 2008.

Despite the baseline effect, domestic demand was particularly strong in the third quarter of 2010. The year-on-year growth rate of private consumption, which accounts for about 70% of GDP, was higher than in the second quarter, at 7.8%. Meanwhile, gross fixed investment increased by 31.3% year on year in July-September-and by 34.4% in the private sector alone. Both these rates of growth were higher than those for the second quarter. Among the components of domestic demand, only government consumption declined year on year, by 1.1%. By contrast, the external balance deteriorated sharply as exports of goods and services contracted and imports continued to rise steeply.

Gross domestic product by expenditure
(% real change, year on year; 1998 prices; non-calendar adjusted, unless otherwise indicated)
 200720082009    2010  
 YearYear1 Qtr2 Qtr3 Qtr4 QtrYear1 Qtr2 Qtr3 Qtr
Private consumption5.5-0.3-10.1-1.7-1.95.0-
Government consumption6.
Gross fixed capital formation3.1-6.2-27.6-24.4-18.5-4.6-
 Public sector6.312.711.80.2-5.7-8.6-2.3-25.614.617.9
 Private sector2.6-9.0-32.2-28.6-21.0-3.5-22.323.132.234.4
Exports of goods & services7.32.7-11.5-11.1-5.47.4-5.3-0.411.6-2.0
Imports of goods & services10.7-4.1-31.0-20.6-11.711.0-14.322.318.816.9
 Quarter on quartera---
a Seasonally and calendar-adjusted.
Source: Turkish Statistical Institute (Turkstat).

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Year-on-year growth in manufacturing industry, trade and transport worked out at 8.7%, 7.5% and 6.7%, respectively, in the third quarter, according to national accounts data. These growth rates were much slower than those recorded in the first and second quarters. Growth in the construction sector accelerated to 24.6% in July-September, reflecting the strength of the recovery in investment. Housing starts were up by 32.3% year on year in January-September. Agriculture contracted by 0.8%, after tepid growth of 0.1% and 0.7% in the first two quarters, mainly reflecting the impact of weather conditions.

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