ECONOMY

Turk growth seen to exceed target

ISTANBUL (Reuters) – Turkey’s Economy Minister predicted yesterday that economic growth would outstrip the government’s IMF-backed year-end target after data showed the economy expanded much faster than expected in the first quarter. Gross national product (GNP) soared an annual 12.4 percent, the State Statistics Office (DIE) reported, compared with market expectations of 8.4 percent. Gross domestic product (GDP) grew 10.1 percent year-on-year, while a Reuters poll of 21 banks and brokerages had predicted 8.1 percent. «This is a pleasing development. We can comfortably predict now that growth will be above the year-end target,» Economy Minister Ali Babacan told a business conference. Turkey targets 5 percent growth by the end of the year for both GDP and GNP under its $19 billion IMF loan accord, struck in 2001 after a financial crisis unleashed the country’s worst recession since the Second World War. The economy shrunk by around 10 percent in 2001. Industrial output growth and strong trade helped to boost activity, analysts said. The industrial sector was up 10.3 percent, while trade rose 16.3 percent, DIE said on its website. Agriculture shrunk by 7.5 percent year-on-year. But Babacan also warned that the pace of growth was likely to slow later in the year due to last year’s strong performance. «Despite the fast pace of growth, inflation is falling, showing that productivity is the source of growth,» said Hakan Aklar, economist at Ak Investment in Istanbul. Taming chronically high inflation is a cornerstone of the IMF pact, and price rises have slowed dramatically this year. In May, consumer prices rose 8.88 percent annually and wholesale inflation was 9.56 percent. But the strong GNP and GDP figures could raise concerns the economy is overheating, especially amid a swelling current account deficit, said Simon Quijano-Evans of Bank Austria Creditanstalt in Vienna. «Nevertheless, we do not see the latter reaching worrying dimensions, especially as the tourism season has set off with a rocket start and exports remain very robust,» he said.