The Turkish economy grew a lower-than-expected 4.5% (https://tmsnrt.rs/2yFGDHQ) year-on-year in the first quarter of 2020, propelled by a lending spree just before the coronavirus pandemic brought on a sharp downturn beginning in March, official data showed on Friday.
A Reuters poll had forecast annual growth at 5.4%. Compared to the fourth quarter of 2019, gross domestic product (GDP) expanded at a seasonally and calendar-adjusted 0.6%, according to TUIK data.
Analysts say the fallout from the pandemic will bring a severe downturn through midyear – the second in as many years for Turkey’s economy – though the strong growth in January and February could soften the blow.
The construction sector, which in recent years drove growth in the major emerging market economy, contracted 1.5% year-on-year in the January-March period.
A measurement of services recorded the highest growth rate at 12.1% year-on-year, followed by information and communication with 10.7% and the industry sector by 6.2%, according to the Turkish Statistical Institute (TUIK).
After a 2018 currency crisis, Turkey left behind a recession last year. Growth surged to 6% in the fourth quarter, driven mainly by credit and an aggressive monetary easing cycle in which the central bank cut rates by 1,575 basis points since July.
In an effort to slow the spread of the new coronavirus, Turkey in March closed its borders, halted flights, and imposed weekend lockdowns, all of which led to sharp declines in trade, tourism, and domestic demand. Some factories also temporarily halted.
Reflecting on the downturn, Turkey’s April trade deficit surged 67% year-on-year to $4.56 billion, with a 41.4% fall in exports and a 25% fall in imports, data also showed.
Government officials say the economy could still record limited positive GDP growth this year, while other analysts see a contraction. In 2019 as a whole, Turkey grew 0.9%.