ECONOMY

Turkish industrial output rises 11.9 percent, beats expectations

ISTANBUL – Turkish industrial output in July soared above market expectations, official data showed yesterday, easing fears that a strong lira could undermine an economic recovery powered by manufacturing and exports. The lira currency has gained some 19 percent against the dollar since the start of the year as confidence has grown over Turkey’s economic recovery from a devastating 2001 financial crisis and International Monetary Fund-backed reforms. Industrial output soared 11.9 percent year-on-year in July, led by the manufacturing sector, where output grew by 12.8 percent, the State Statistics Office (DIE) said. Output in the energy sector rose by 6.4 percent, while the mining sector’s output was 4.7 percent higher, DIE said. The upbeat data has spurred hopes that Turkey will meet or beat an IMF-backed year-end gross national product (GNP) growth target of 5 percent. The IMF signed a $16 billion loan pact with Turkey amid a recession in 2001 when the economy shrank by 9.5 percent. The July industrial output data was well above market expectations of 10 percent. «The data is quite a bit stronger than what we had expected, and the numbers tell you that growth is still intact. The manufacturing sector is weathering the effects of a strong currency,» said Tolga Ediz of Lehman Brothers in London. «If the currency were going to have an adverse effect, we would be seeing the signals this month and in the coming months in the industrial output data.» Ediz said slowing growth would first be reflected in a lower number of orders to the manufacturing sector, then in output data around this time and lastly in trade figures. The lira firmed again to 1,381,000 to the dollar from a previous 1,384,000 on the interbank market yesterday. Current account concerns But some analysts still sounded a warning that the rise in output was driven mainly by imports and could thwart Turkey’s current account target this year. «While strong growth is positive, it also points to continued strong import growth, keeping alive concerns about the size of Turkey’s current account deficit… driven predominantly by the widening of the trade deficit,» wrote 4Cast analyst Caroline Gorman. Turkey’s current account deficit widened to $4 billion in the first six months of the year, propelled by a 34.4 percent rise in imports and by the unexpectedly strong lira. Turkey and the International Monetary Fund have agreed on a year-end current account deficit target of $7.4 billion, revised from an earlier $6.1 billion. The data on industrial output, a key indicator of economic growth, comes ahead of official data this week on GNP and gross domestic product growth in the second quarter this year. DIE also said industrial output had risen 8.2 percent in the January-to-July period. The institute revised June industrial output data down to 11 percent from 11.7 percent.