Turkish Government Says Politics Hurt Economy Less Than Feared

Turkey’s economy probably has maintained last year’s growth momentum, even in the midst of a corruption probe that created new political uncertainty, the finance and economy ministers said.

Tax revenue and industrial production data show gross domestic product expanded more than the government forecast in the first quarter, Finance Minister Mehmet Simsek said in an interview on CNBC-E television. The economy probably grew at about the same rate as in the last two quarters of 2013, more than 4 percent, Economy Minister Nihat Zeybekci said on NTV television.

“I was also worried in the first quarter, due to the political uncertainty” that set in after the corruption investigation targeting Prime Minister Recep Tayyip Erdogan’s government became public in December, Simsek said. “But the early economic data does not support forecasts for low economic growth.”

Economists have lowered their 2014 GDP forecasts for Turkey in response to the probe. Output will expand 2.2 percent this year, according to the median estimate in a Bloomberg survey last month, compared with 3.2 percent in a similar survey in January. Turkey’s economy grew 4 percent last year.

Growth could be boosted if the central bank would cut rates, now that the ruling AK Party’s victory in March 30 local elections eased political uncertainty, Zeybekci said. The election was seen as a referendum on Erdogan’s rule, and some of the voters who supported his party said the corruption investigation was less important than their faith in his handling of the economy.

‘Measured Steps’

Central bank Governor Erdem Basci said on April 7 that he may consider “measured steps” to ease rates.

Simsek pointed to 4.9 percent growth in industrial output in February from a year earlier as proof of the economy’s resilience. The performance beat estimates in a Bloomberg survey of eight analysts.

Exports to Europe, Turkey’s main trade partner and source of most foreign direct investment in Turkey, are on the rise this year, Zeybekci said. Tax revenue, seen as a gauge of domestic demand, increased by 11 percent during the first two months of 2014 from a year earlier, according to official data.

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