Turkey GDP Growth Above 5% Outdone by Only China, India in G-20

(Bloomberg) -- Turkey maintained economic growth at levels exceeded only by China and India among G-20 economies, as a surge in construction buoyed output.

Gross domestic product expanded 5.1 percent during the April-to-June period from a year earlier, slightly lower than the median estimate of 5.3 percent in a Bloomberg survey. The economy grew 2.1 percent from the first quarter, exceeding economists’ 1.8 percent estimate.

Monday’s report makes Turkish growth one of the fastest among the world’s 20 largest economies and marks the second consecutive quarter where annual expansion topped 5 percent. Investments rose at the highest pace since 2015, led by the construction industry, where big-ticket projects were backed by the government in public-private partnerships.

Government spending on goods and services slowed at the fastest pace in more than two years, a surprise that brought the headline growth figure lower than the consensus, according to Garanti Bank economist Asuman Kemiksiz, who was among the most accurate forecasters in the survey.

While the slowdown in government consumption was lower than expected, “there is a visible revival in consumer spending which, along with the rise in exports, will support growth in the third quarter,” she said by phone after the data. “We expect growth to be in the vicinity of 7 percent during that period.”

Lira Strengthens

The lira strengthened after the report was published on Monday. It was trading 0.3 percent higher at 3.4007 per dollar at 11:04 a.m. in Istanbul.

Exports grew 10.5 percent while gross capital formation, a category that includes investments, rose 9.5 percent from a year earlier. Outlays on construction rose 25 percent while spending on machinery and equipment slumped 8.6 percent, falling for the fourth consecutive quarter.

Household consumption, estimated to make up nearly two-thirds of the economy, grew 3.2 percent from a year earlier, compared to a revised 3.6 percent in the previous quarter. Government spending on wages, goods and services fell 4.3 percent, after growing a revised 9.7 percent in the first quarter.

The economy grew 6.5 percent in the second quarter when adjusted for number of working days, compared with the median estimate of 5.2 percent in a Bloomberg survey. The Turkish Statistical Institute said annual GDP growth in 2016, when calculated independently from quarterly readings, was 3.2 percent, according to a separate bulletin on its website. The statistics agency began publishing an independent, annual GDP growth report in December.

--With assistance from Selcan Hacaoglu

To contact the reporter on this story: Onur Ant in Ankara at oant@bloomberg.net.

To contact the editors responsible for this story: Alaa Shahine at asalha@bloomberg.net, Amy Teibel, Mark Williams