Turkish Economy Slows in Q3

The Turkish economy experienced a slowdown in the third quarter, attributed to a decrease in spending caused by higher interest rates imposed by the central bank. Data from Turkstat, the country's statistics office, revealed that gross domestic product (GDP) only grew by 0.3% on a seasonally and calendar adjusted basis, down from the 3.3% growth in the previous quarter. However, the economy still expanded by 5.1% compared to the same quarter last year.

This lower growth rate follows the implementation of more traditional monetary policies by Turkey's central bank, which increased interest rates from 8.5% in May to 40% in November. Analysts, such as Liam Peach from Capital Economics, predict that this trend of slowing growth will continue into 2024 as the central bank maintains its restrictive stance on interest rates. They argue that this will help narrow the current account deficit and alleviate inflation pressures.

Although inflation stands at a concerning 61.3% as of October, the central bank has indicated that it may slow down monetary tightening since borrowing costs are already nearing levels that could lead to reduced inflation.

Peach suggests that the economy's slowdown offers further evidence of weakening demand and a rebalancing of the economy. He even speculates that there is a possibility of Turkish GDP contracting in the fourth quarter.