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Turkish economy emerges from recession

Posted on 14 February 2011

Date: 31/03/2010
Turkish economy emerges from recession

Turkey emerged from a crippling recession as its economy grew by a strong 6.0 percent in the fourth quarter, official data showed Wednesday.

The growth — which exceeded market expectations of 4.0 percent — broke a slump that lasted four quarters and helped to reduce the economic contraction for 2009 to 4.7 percent, the Turkish Statistical Institute, or TurkStat, said.

The government had projected a 6 percent contraction for 2009 while the International Monetary Fund had estimated that the Turkish economy was likely to shrink 6.5 percent in the whole of 2009.

The institute also revised contraction rates for the first, second and third quarters from 14.7 to 14.5 percent, from 7.9 to 7.7 percent and from 3.3 to 2.9 percent.

Analysts said the fourth quarter rate put Turkey on a path of strong growth that could reach and even exceed 5 percent this year.

“We expect today’s strong print to be followed by an even stronger growth rate in the first quarter in 2010, possibly reaching double digits,” Inan Demir, chief economist at Finansbank, said in a research note to investors.

He predicted that the growth rate would slow down later in the year due to weakening base effects, but said, “A growth rate in 5 to 5.5-percent range for full year 2010 looks plausible.”

The return to growth could pave the way for the Turkish Central Bank to hike its benchmark interest rate, which it had slashed by 10.25 percentage points to a record low of 6.5 percent since November 2008.

The bank has been holding the rate steady since December but said recently it might be coming to the end of the loose monetary policy.

“We maintain our expectation for 200 basis points of rate hikes this year,” Demir said.

Turkey’s once-booming economy had been contracting since the fourth quarter of 2008 as the global economic crisis set in.

Inflation fell to 6.53 percent last year, undershooting the official target of 7.5 percent but unemployment rose to record levels, hitting 16.1 percent at one time.

But since late 2009, there have been signs of recovery in the form of a slowdown in the contraction rate, a rise in inflation and an easing in unemployment.

Earlier this year, Turkey called off loan talks with the IMF, with Prime Minister Recep Tayyip Erdogan saying that the country was “able to stand on its own feet” and did not need emergency funds

31/03/2010 Source Hurriyet Daily News

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