Turkey's economy exceeded expectations by expanding 3.8% year-over-year in the second quarter of 2023, according to data released by the Turkish Statistical Institute (TurkStat) on Thursday.
During the April-June period, the country's gross domestic product (GDP) at current prices surged by a remarkable 60.7% compared to the previous year, reaching TL 5.5 trillion (approximately $271.5 billion).
Economists had anticipated a more modest growth rate of 3.5% for Turkey's economy in the second quarter. This positive figure follows a revised 3.9% annual growth in the first quarter of 2023. Notably, Turkey's economy shifted from a 0.1% contraction in the previous quarter to a robust 3.5% growth in the three months to June.
While a Reuters poll of 12 economists estimated a GDP growth of around 3.5% for the same period, a survey by private broadcaster Bloomberg HT and Anadolu Agency (AA) had forecasted growth rates at 4% and 3.3%, respectively.
Commenting on the better-than-expected performance, Treasury and Finance Minister Mehmet Şimşek emphasized, "Our economy continued its strong growth performance in the second quarter of the year when we tried to compensate for the economic effects of the earthquake disaster." He further underscored the government's goal of achieving strong growth alongside balance, sustainability, and inclusivity.
The government's economic strategy prioritizes resource allocation to investment, employment, production, and exports over consumption to bolster the economy against external shocks The government has also been focused on curbing inflation, a top priority following parliamentary and presidential elections in May.
Türkiye's central bank recently outlined a road map aimed at ensuring sustainable disinflation starting in 2024, adopting "gradual and decisive" measures.
In terms of sectors, services, including wholesale and retail trade, transport, storage, accommodation, and food services, saw the highest value-added growth at 6.4% year-over-year in April-June. The construction sector followed with a 6.2% increase, while agriculture experienced a 1.2% uptick. In contrast, the industrial sector witnessed a 2.6% decrease during the same period.
Turkey's economic activity in the first quarter was affected by devastating earthquakes that struck the country's south and southeast, resulting in significant casualties and extensive damage. The reconstruction efforts are estimated to cost more than $100 billion.
Goldman Sachs attributed the second-quarter growth acceleration to pre-election fiscal stimulus and post-earthquake recovery. Household consumption remained robust, although industrial production and exports experienced some slowdown.
Imports of goods and services increased by 20.3% compared to the previous year, while exports of goods and services declined by 9% in the three months. TurkStat also revised Turkey's annual GDP growth rate for 2022 slightly downward to 5.5%.
Despite challenges such as global financial conditions and earthquake impacts in the agriculturally significant southeastern region, Turkey's economy maintained its growth momentum in the first quarter of 2023.