Turkey faces its first recession in a decade as the country heads toward municipal elections dealing a blow to Tayyip Erdogan.
On Monday, data released shows how Gross domestic product seasonally shrank 2.4% from previous three months last quarter after declining a revised 1.6%. GDP declined 3% year ago.
The push of Erdogan for growth & his pressure on central bank in order to keep interest rates low, Turkey was poured with capital within era of record monetary stimulus globally.
However, expansion lifted economy by an average of 7% quarterly since 2009 has fizzled currency crash out, US rifted an unprecedented diplomatic as policy missteps.
“This is an indictment of Erdonomics and a direct consequence of a monetary policy in 2018 conducted in the interests of short-term political expediency rather than economic pragmatism”
Investors worry that Turkey will face a slog to recovery as foreign capital torrent’s dries up while companies paying debt down. Private consumption sank by 8.9% annually with GDP of Turkey per capital falls to $9,632 from $10,000 in 2017. Economy grew 2.6% in the full year in the full year.
Berat Albayrak, Treasury& Finance said the worst is behind Turkey & economy is about to recover rapidly. As exports rise besides income of tourism, are going to be key drivers for growth.
In Istanbul, lira declined 0.5% after releasing data, traded weaker by 0.2% at 5.4489 per dollar as of 10:32 a.m considered the third-worst performer with a loss of 3% in emerging markets against US currency.
“Turkey was one of the fastest-growing emerging economies in 2017, but its growth wasn’t balanced. Excess government spending and rapid credit growth caused imports to surge and the current account deficit to widen. Unsurprisingly, the economy is paying the price for past excesses”
Government has heaped pressure on state banks as effort to restart growth to ramp lending up, as annualized credit growth was positive for the first time since August by selling bonds to unemployment fund of Turkey in addition to working on a fresh plan to bolster capital of state-owned banks.
No longer an emerging markets star performer, Turkey has fallen into its first recession since the financial crisis a decade ago. Its seasonally and calendar-adjusted GDP contracted by 2.4% q/q in Q4, following the 1.6% q/q contraction recorded in Q3, statistical institute TUIK said on March 11.