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The Turkish economy grew 21.7% in the second quarter from the same period last year, the Turkish Statistical Institute announced Wednesday, in what was hailed as the highest growth rate in Turkey’s recent history. Despite the mammoth rate, the country’s economic prospects remain fragile amid ongoing currency risks over President Recep Tayyip Erdogan’s push for lower interest rates despite unyielding inflation.
The nearly 22% increase in gross domestic product (GDP) owes much to a strong base effect from the second quarter of last year, when the country’s GDP shrank 10.3% under the impact of the COVID-19 pandemic as households cut back on consumption, many businesses were fully or partially closed, and lockdowns paralyzed the services sector. Thus, the figure was not exactly a surprise. Many other countries have posted two-digit growth rates, though not as high as 22%.
No doubt, the massive growth rate owes also to economic revival after the easing of pandemic restrictions. A boom in private consumption — the result of deferred spending during the pandemic — was a major driver, in addition to new investments to replenish stocks exhausted during the pandemic and a similar revival in exports and tourism.
Turkish consumers — particularly those in the top 20% income group — had a further incentive to spend as inflation continued to rise but interest rates remained unchanged, leading many to rush to buy cars and other durable goods before prices increased further. Those with ample savings put money also in investment homes and other real estate.
Meanwhile, pent-up demand in foreign markets helped the revival of certain Turkish exports and thus industrial production. The country’s tourism sector, which had ground to a halt in spring 2020, perked up as well, contributing to the uptick in private consumption as well as to foreign trade.