Turkish Economy Expanded at Slowest Pace Since 2009 Recession

Turkey’s economy grew 1.4 percent in the fourth quarter last year, the slowest pace since a recession in 2009, as central bank efforts to cut the current-account deficit depressed domestic demand.

The economy grew 2.2 percent in the full year, according to data released by the state statistics institute in Ankara today, trailing other regional economies including Israel, which grew 3.1 percent, and Russia, whose economy expanded by 3.4 percent. That follows expansion in the Turkish economy of 8.8 percent in 2011 and 9.2 percent in 2010.

The slump came as central bank Governor Erdem Basci’s rates-corridor policy, which allows him to vary the cost of funding to banks on a daily basis, helped cut the current- account deficit by $28 billion by slowing growth in loans. The gap was still the third-biggest in the world last year at $49 billion, according to a Standard & Poor’s report on March 28. It was the second-biggest after the U.S. in 2011.

“Growth of 2.2 percent is a success” in the context of “a slowing in the global economy, the deepening of the crisis in the EU, our biggest trading partner, increasing geopolitical risks in our region and high petrol prices,” Finance Minister Mehmet Simsek said in an e-mailed statement. “2013 will be a year in which growth accelerates in a balanced fashion.”

The economy will probably expand by 4 percent this year, according to the average estimate in a Bloomberg survey of 31 economists, matching the government’s forecast. Turkey should grow at least 6 percent a year to reach its goal of becoming one of the world’s top 10 economies by 2023, the centennial of the Turkish Republic, Economy Minister Zafer Caglayan said today.

Private Demand

“Private domestic demand was very weak” last year, Inan Demir, chief economist at Finansbank AS in Istanbul, said in e- mailed comments today. “We expect GDP growth to accelerate relying on stronger domestic demand this year.”

Gross domestic product climbed to $786.3 billion in 2012 and per-capita income rose to $10,504, according to the statistics office. Private consumption shrank by 0.7 percent in the year, while government spending rose 5.7 percent.

To contact the reporter on this story: Benjamin Harvey in Istanbul at bharvey11@bloomberg.net

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net

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