Turkey emerges from recession, growing 1.3 percent in first quarter

(Updates with analyst comment, paragraph seven)

Turkey’s economy emerged from a recession in the first quarter of this year, according to official data.

The economy grew 1.3 percent in the three months to March from the fourth quarter of last year, the Turkish Statistical Institute said on Friday.

Turkey’s economy had plunged into a recession, defined as two-straight quarters of negative quarter-on-quarter growth, after a currency crisis sent the lira to record lows in August. The government has since sought to stimulate an economic revival with tax cuts and cheap loans from state-run banks.

On an annual basis, the economy contracted 2.6 percent, the institute reported.

The lira was down 0.1 percent at 5.88 per dollar at 11:03 a.m. local time in Istanbul, little changed from earlier levels.

Analysts have warned that Turkey’s economy may contract again on a quarterly basis in the three months to June. They point to continuing losses for the lira this year – the currency plunged 28 percent in 2018 - and worsening consumer and business confidence.

"The Q1 upturn was only really driven by fiscal pump priming and state-owned bank lending pre-Istanbul elections," Tim Ash, senior merging markets strategist at Blue Bay Asset Management in London, said in e-mailed comments to clients. "Confidence indicators suggest that in Q2 the economy double-dipped, as consumers seem worried by the political backdrop."

Pessimism among consumers and companies across Turkey's economy, from builders to manufacturers and the service industry, has been increasing. A benchmark measure of consumer confidence fell to 55.3 points from 63.5 points in April, the Turkish Statistical Institute said on May 23. That was the lowest level since records began 15 years go. Any figure below 100 indicates pessimism about the future. 

An index of overall confidence in the economy dropped to 77.5 in May from 84.7 in April, the worst reading since October.