Page 44 - bne_Magazine_July_2017

44 I Southeast Europe bne July 2017
President Erdogan's government hopes to use mega infrastructure projects similar in scale to the Eurasia Tunnel – opened to traffic crossing the Bosphorous strait late last year – to give the economy a further boost.
Better than expected Turkish growth raises concerns
bne IntelliNews
Turkey is accelerating away from the economic contraction it expe- rienced in the third quarter of last year, but some analysts are sceptical that the growth trajectory has legs.
“Even the current growth boom, mostly driven by government spending and consumer expenditure, is not sustain- able,” says Atilla Yesilada, an adviser at GlobalSource Partners. “The treasury has already jacked up its net borrowing ratio over 100%, while consumer and corporate leverage is increasing alarm- ingly. Deposit rates have shot above 15%, rendering credit very expensive.”
The official GDP expansion of 5% y/y in Q1, which was also driven by net exports, represented the best performance since the second quarter of 2016’s 5.3% y/y and followed
Q4 2016’s rebound of 3.5%. It has
www.bne.eu
fuelled hopes that the country’s $857bn economy may be on the growth path again, having faltered following last summer’s attempt at overthrowing the government.
The better-than-expected GDP data
has been hailed by ministers as a sign
of investors’ retained confidence in the economy and as an indication that the stimulus programme introduced follow- ing the failed coup is working.
The growth comes as a boost for President Recep Tayyip Erdogan, who on April 16 officially narrowly won the crucial referendum on expanding his powers under an executive presidency. His next target is a decisive victory in the 2019 general election.
Encouraged by the first-quarter figures, the government appears to believe that
Turkey has put the major economic problems which surfaced last autumn behind it and that the strong growth trend will continue.
But analysts such as Yesilada continue to ask whether the government’s spending spree and consumer expenditure, which constituted the backbone of the economic rebound
in Q1, will be sustainable in the longer run. They argue that the positive effects of the stimulus programme will eventually fade away, probably in the final quarter of 2017 or in early 2018.
TUIK data on the new growth show that government spending increased by 9.4% y/y in Q1, while household consumption, which accounted for 60% of the country’s national income, was up 5.1% y/y thanks to tax cuts introduced on certain consumer goods, such as white goods.