Turkey’s economy was the fastest growing last year, surging 8.5 per cent, and a slowdown to 5.2 per cent in the fourth quarter has boosted the government’s belief that it was on track for a soft landing this year.
Analysts saw the moderation in growth as an encouraging sign for authorities as they wrestle to rebalance the country’s current account while defending its currency.
Full-year growth matched the 8.5 per cent forecast in a poll, on Monday’s Statistics Institute data showed, making the EU candidate country the fastest growing economy among OECD and EU countries last year.
Since late 2010, Turkey’s central bank has run a complex policy mix designed to defend the lira currency and keep a lid on inflation as well as hacking away at the deficit.
The policy is based on daily injections of lira funding, a flexible corridor between base lending and borrowing rates and high bank reserve requirements coupled with a low policy rate.
However, the strong economic performance pushed it to implement monetary tightening in the fourth quarter by widening the interest rate corridor to counter overheating risks.
As a result of this tightening, interest rates on consumer loans jumped around 300 basis points during the fourth quarter. Since Prime Tayyip Erdogan’s ruling AK Party first came to power in 2002, the government has transformed the economy from a basket case with triple-digit inflation to a star performer in Europe.
Per capita GDP rose to $10,444 last year, surging from $3,492 in 2002. Broken down over the year, annual expansions was 8.4 per cent in the third quarter, 9.1 per cent in the second and 11.9 per cent in the first quarter.
“The fourth quarter figures show that the soft landing process is continuing in line with targets in a balanced way,” Finance Minister Mehmet Simsek told Reuters in a statement, reiterating a government forecast of 4 per cent growth this year.
Growth is expected to have slowed sharply at the start of this year against a background of global economic weakness, but Simsek forecast a subsequent recovery.
“Even if a slowdown is expected in the first quarter, leading indicators and expectations surveys on the second quarter point to a recovery in the economy,” he said.
The late-2011 slowdown showed private consumption moderating after double-digit growth rates at the start of the year, adding weight to expectations of a narrowing of the large current account deficit.