Turkey may be headed for technical recession by end of year – Bloomberg

Although Turkey maintains its place among the world’s fastest-growing nations with  a gross domestic output that rose 5.2 percent during the three months, some investors say the country is headed for a technical recession later in the year, Bloomberg reported.

The country’s economy expanded in line with economists’ expectations but less than the 7.3 percent pace of the previous quarter, according to data from the Turkish Statistical Institute on Monday.

"A deeper dive into the data shows consumers and investors starting to hit the brakes, while government spending and exporters prevented a more rapid slowdown,’’ Bloomberg noted, stressing that the lira’s recent depreciation will force the government to reduce spending and the central bank to raise borrowing costs to stabilise financial markets.

Noting that the lira lost around 41 percent value this year, Bloomberg highlighted the spike in the cost of borrowing for corporates and consumers, as well as drop in confidence.

"Deterioration in the economic outlook has resulted in downward revisions to growth estimates by banks and credit rating agency Fitch,’’ it said.

A slowdown in some sectors may have begun, according to Bloomberg, which noted that private consumption, comprising an estimated two-thirds of the economy, grew 6.3 percent on an annual basis during the first three months of the year, losing speed from a revised 9.3 percent in the first quarter.