Turkey economy returns to growth in third quarter

(Updates story with manufacturing PMI data in the final two paragraphs)

Turkey’s economy grew on an annual basis for the first time this year, in a further sign that a painful economic downturn may be coming to an end.

The economy grew by 0.9 percent in July to September compared with the same period of 2018, the Turkish Statistical Institute said on its website on Monday. That almost matched a 1 percent growth prediction in a Reuters poll of economists.

The annual expansion was led by the farming industry, which grew by 3.8 percent. Industrial output increased 1.6 percent and services 0.6 percent. The size of the economy expanded to $734 billion from $722 billion in the second quarter of the year, the data showed.

Turkey emerged from a painful economic recession – defined as two successive quarterly contractions -- in the first three months of this year. But a recovery has taken hold only gradually, prompting the central bank to slash interest rates and the government to dip into the coffers of state-run banks to dish out cheap loans to consumers and businesses.  

Quarter-on-quarter economic growth slowed to 0.4 percent, less than half of the 1 percent expansion in the three months to June, the data showed. An increase in household expenditure, the main driver of Turkey’s economy, eased to 1.9 percent from 3.4 percent in the previous three months.

Turkish President Recep Tayyip Erdoğan has set an ambitious goal of 5 percent economic growth for next year. He may only be able to achieve that target through potentially destabilising credit stimulus, economists say. The government expects 0.5 percent growth in 2019.

Turkey’s manufacturing activity edged up in November, but remained in negative territory, indicating that recovery from an economic recession may be slow.

Turkey’s purchasing managers’ index, a key indicator of industrial sentiment, rose to 49.5 in November from 49 the previous month. the Istanbul Chamber of Industry (ISO) and IHS Markit, a London–based global information provider, said in a report published on Monday. Any reading below 50 indicates a deterioration in the industry.