World Bulletin / News Desk
Turkey's economy grew slower than expected in the second quarter and a deeper slowdown is expected during the rest of the year as domestic demand weakens, raising pressure on the central bank to cut borrowing costs more aggressively.
Gross domestic product (GDP) grew 2.90 percent year-on-year, below a Reuters poll forecast of 3.25 percent, data from the Turkish Statistics Institute showed. First quarter growth was revised to 3.3 percent from 3.2 percent reported in July.
Finance Minister Mehmet Simsek said the data showed the economy continued to experience a "soft landing" but added that initial indicators pointed to more moderate growth in the second half. It would now be no surprise missing a full-year 4 percent growth target would be no surprise.
"A growth performance of 2.9 percent at a time when the eurozone is shrinking, and many emerging economies are slowing down, cannot be looked down on," Simsek told Reuters.
Turkish bond yields fell to their lowest since January 2011 as the growth figures fuelled expectations of more aggressive easing of monetary policy by the central bank.
The yield on Turkey's two-year benchmark bond fell as low as 7.29 percent from a previous close of 7.35 percent.
Turkey's economy was the fastest growing in Europe last year, surging 8.5 percent, largely due to strong household consumption and high investment expenditures in the private sector.
But although export growth has remained strong, with firms refocusing on Africa and the Middle East to shield themselves from a deepening crisis in main trading partner Europe, domestic demand has weakened and policymakers have been trying to steer the economy softly back down to earth.
"Growing more than 4 percent this year is becoming harder by the day. The landing has occurred but this plane is not going to stop. We should refuel the plane and move on," Economy Minister Zafer Caglayan said in emailed comments.
"The central bank should not delay in taking its feet off the brakes."
The central bank eased policy slightly at its last meeting on Aug. 16 by raising the amount of lira reserves commercial banks can hold in foreign currencies and gold. It also gave its clearest signal yet that it could cut interest rates going forward as inflation falls.
Analysts expect the central bank to lower the upper band of its interest rate corridor by up to 100 basis points at its next monetary policy committee meeting on Sept. 18. The overnight borrowing rate currently stands at 5 percent and the lending rate at 11.5 percent, with the benchmark repo rate at 5.75.
"We are seeing clearly both the impacts of the central bank policies and the global slowdown on the Turkish economy," said Gizem Oztok Altinsac, economist at Garanti Securities.
"From now on we definitely think the central bank will switch to easier policy ... We expect a 50 basis point cut on the upper band of the interest rate corridor," she said.
Quarter-on-quarter, gross domestic product (GDP) grew a seasonally-adjusted 1.8 percent in the second quarter, according to the Turkish Statistics Institute data.
The 2011 growth figure was unrevised from an initial 8.5 percent reported in April.
"The slowdown in economic growth is obvious and today's data confirms it," said HSBC strategist Fatih Keresteci,
"The trend shows we are below the 4 percent growth target (for the full year), somewhere around the 2.5-3.0 percent area. Thus we find the central bank decision to pull its feet off the brakes correct."
A retrial of the Sledghammer case began on Nov. 3, 2014, after the Constitutional Court ruled in June 2014 unanimously that the convicted suspects’ rights were violated concerning “digital data and the defendants’ testimonies.”
Defense Minister Ismet Yilmaz says the joint Turkish-US train-and-equip program for 'vetted' Syrian fighters can start in May.
Security to top agenda at aviation conference on Wednesday in Istanbul.
Power outage in most of Turkey occurred after problems in transmission lines, Turkish Electricity Transmission Company, TEIAS officials say.
Turkey's national flag-carrier says it has cancelled flights because of political turmoil in Yemen.
A Turkish Airlines flight from Istanbul to Sao Paulo makes emergency landing in Casablanca.
President Erdogan has said that he plans to visit Iran but will be watching the developments in Yemen
Turkish dailies on Monday focused on the main opposition CHP party's interal primary elections.
The 300-million Turkish lira vessel will serve for at least 30 years.
Presidential system is the right thing for Turkey, says Turkish PM Ahmet Davutoglu
Armenian experts talking to The Anadolu Agency believe the two historically hostile countries could start a new phase after 2015.
Alimoglu said the NGO would occasionally dispatch doctors from Turkey to Gaza for difficult cases that Gazan doctors could not treat or that required competencies not available in the enclave.
Prosecutors said the Tuvalu-registered 5,095 deadweight tonne ship Kanton was being held in the Ukrainian port of Kherson. They said the crew could go to jail for up to three years and the ship could be seized.
Yalcin Akdogan said the support for the solution process is beyond AK Party’s electoral base.
Saudi King shares information with Turkish President about military operation and airstrikes against Houthis.
-Minister of Economy Nihat Zeybekci says Turks and Tatars have blood ties, and so need to further each others' interests.