Turkey's economic growth slows as higher interest rates affect GDP
(MENAFN) The Turkish Economy has experienced a notable deceleration in growth, primarily attributed to the impact of elevated interest rates. According to the country's state statistics agency, Turkey's seasonally and calendar-adjusted GDP increased by only 0.1 percent in the second quarter of this year, a sharp decline from the 1.4 percent growth recorded in the previous quarter. This slowdown extends to annual figures as well, with GDP growth decreasing to 2.5 percent from 5.3 percent in the first quarter, which was previously revised from an earlier estimate of 5.7 percent.
Economic forecasts had anticipated a 0.5 percent contraction on a quarterly basis and a 3.2 percent increase year-over-year. The first quarter's growth had been bolstered by domestic demand, including higher minimum wages and rising inflation expectations that fueled consumer spending. Despite last year's annual growth being revised upwards to 5.1 percent from 4.5 percent, Turkey faced challenges including a slowdown among major trading partners and the severe impact of a February earthquake.
Sector-specific data reveals a mixed performance across the economy. The construction sector saw a robust growth of 6.5 percent, while the real estate, agriculture, forestry, and fishing sectors grew by 3.7 percent. The information and communications sector grew by 3.4 percent, and other service activities recorded a notable 7.4 percent increase. In response to rampant inflation exceeding 60 percent, Turkey's central bank has significantly raised interest rates—nearly six times to a current rate of 50 percent—to mitigate spending and curb inflationary pressures.
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