Jun 11 2018

Erdoğan vows strong Turkish growth after 7.4% expansion

Turkish President Recep Tayyip Erdoğan said the country will continue growing at a fast pace after the economy expanded 7.4 percent in the first quarter, the highest rate in the OECD.

Annual economic growth accelerated from 7.3 percent in the fourth quarter of last year. The economy grew 2 percent quarter-on-quarter, the biggest increase in a year, date provided by the government’s statistics office on Monday showed.

"Despite all the attacks on the economy and games played, we will continue growing strongly with a sound macro-economic basis!" Erdoğan said on Twitter, without providing details about how the government will achieve that aim.

Erdoğan’s comments, made less than two weeks before presidential and parliamentary elections, stand in stark contrast to those of economists, who say central bank interest rate hikes totaling 425 basis points over the past month could bring a sharp economic slowdown. The bank was forced to raise rates after government stimulus measures increased fears of economic overheating and a currency crisis, pushing the lira to a record low of 4.92 to the dollar. The currency fell 1.2 percent to 4.527 on Monday.

Last month in London, Erdoğan vowed to lower interest rates and take a more active role in monetary policy should he win a second term as president, which will give him enhanced executive powers. He has blamed the slump in the lira on foreign forces seeking to unseat his government.

Turkey’s benchmark interest rate of 17.75 percent is now the highest in major emerging-market economies after Argentina, which just signed a $50 billion economic rescue package with the International Monetary Fund.

Data for the current account deficit, published by the central bank on Monday, showed negative portfolio inflows into Turkey in April. Foreign direct investment also shrunk in the first four months. Turkey needs such capital to finance the current account gap, which grew to about 6.5 percent of GDP, and to fund growth in its economy.