DM Monitoring
ISTANBUL: The Turkish economy has shrunk by nearly 10 percent in the second quarter of 2020 as the COVID-19 outbreak seriously disrupted industrial activity and exports, according to official data published on Monday.
Turkey’s economy decreased by 9.9 percent year on year in the second quater of 2020, the country’s statistical authority announced.
Gross domestic product (GDP) at current prices amounted to 1.04 trillion Turkish liras (141.45 billion U.S. dollars) in the April-June period, according to the Turkish Statistical Institute (TurkStat).
The Turkish economy grew by 4.5 percent year on year in the first quarter of 2020, propelled by a lending spree just before the pandemic with a sharp downturn beginning in mid-March. A partial lockdown and strict restrictions followed.
However, the contraction announced is less than forecast by economists, who were expecting the emergent nation’s economy to narrow by up to 13.5 percent.
Treasury and Finance Minister Berat Albayrak hailed the growth data as a success for Turkey on his Twitter account, saying the economy had contracted at a slower pace than many developed countries, mentioning the United States and European Union states.
“We knew that we would feel the effects of the pandemic, which has been the worst disaster in a century and brought the global economy to a standstill,” said Albayrak.
“Yet, we have done well when you compare our growth rates with the rest of the globe. The Turkish economy is stable, dynamic, and strong,” he added.
Enver Erkan, an economist from Istanbul’s Tera Securities, which had forecast a contraction of 12.5 percent, linked the massive shrinking to business closures and lockdown measures.
“The industry seems to have shrunk by 16.5 percent, the construction sector by 2.7 percent and services by 25 percent,” he explained in a note to investors. He said that stimulus measures implemented by the Ankara government, such as a credit push, interest rate cuts, and fiscal spending, had prevented a deeper contraction. In the second quarter, household consumption fell, and exports dropped by 35.3 percent on an annual basis. Nevertheless, these same measures of the Turkish government to protect the country from the fallout of the global health crisis have had a negative effect on the ailing Turkish lira who lost ground against the U.S. dollar.
The Turkish currency has depreciated nearly 20 percent against the greenback this year, fueling inflation and price hikes on essential goods.
The International Monetary Fund (IMF) predicts a contraction of 5 percent of the Turkish economy this year, while Albayrak has announced a more optimistic forecast between -2 percent and +1 percent.
Turkey was slowly recovering from a recession caused by a 2018 currency meltdown when the coronavirus outbreak hit, deepening the G20 nation’s economic woes.
To prop up the lira, the central bank and state lenders have sold billions of U.S. dollars, depleting foreign currency reserves and worrying investors about the country’s debt repayment outlook.
