Istanbul: Turkish output grew a stronger-than-expected 4 per cent in 2015, official data showed on Thursday, as robust domestic demand provided cheer for an economy that has been weighed down by political and security concerns in recent months.
Spillover effects from the conflict in neighbouring Syria have dented Turkey’s key tourism industry and relations with major trade partner Russia, while investor confidence has been hit by uncertainty generated by an election cycle last year.
The growth exceeded a forecast of 3.9 per cent in a Reuters poll, helped by a strong showing in the final quarter when the economy expanded 5.7 per cent, according to data from the Turkish Statistics Institute. Economists had expected expansion of 5.2 per cent in the fourth quarter.
Deputy Prime Minister Mehmet Simsek said the 2015 growth was in line with the government’s medium-term programme and made it the fourth fastest-growing economy among G20 countries.
“This success was achieved despite last year’s two general elections, increasing geopolitical tensions in our region, problems in our trade partners and global financial market volatility,” Simsek said in a statement.
The growth data came after the Turkish central bank last week cut the upper end of its interest rate corridor and against a background of consumer price inflation near 9 per cent.
“The strong growth figures, coming alongside mounting signs of an inflation problem, make the central bank’s decision to cut interest rates last week even harder to justify,” said William Jackson, an economist at Capital Economics in London.
The economic outlook has been clouded by security concerns after a spate a bomb attacks this year, including two in Istanbul — its biggest city and traditional tourist draw — blamed on Islamic State militants.
Tensions with Russia have also hit trade and tourism after Turkey shot down a Russian jet over Syria last year, prompting President Vladimir Putin to impose economic sanctions on Turkey.
The number of foreign visitors coming to Turkey dropped by 10 per cent last month, according to data released earlier this week, and marking the biggest drop in a decade.
“I do think that the economy will finally slow in 2016, as the security risks begin to weigh, and some sectors, e.g. tourism, real estate begin to suffer,” said Timothy Ash of Nomura International.
He said growth might be 1 per cent lower, at 2.5-3 per cent.
There was little market reaction to the data, with the lira firming 0.34 per cent against the dollar to 2.8270 while the main share index slipped 0.24 per cent.
Domestic demand contributed 4.3 percentage points to growth and net foreign demand made a negative 0.3 point contribution, Simsek said, pledging structural reforms to achieve strong, sustainable growth.
Separately, the statistics institute said Turkey’s trade deficit narrowed 32.8 per cent year-on-year to $3.165 billion in February.
Turkey is heavily dependent on energy imports and a wide current account deficit has been a perennial weak point for the economy. Simsek said the current account deficit fell to 4.5 per cent of GDP last year.