Turkey’s growth to contract 2 pct in Q4 2008, revival likely in Q2

The Turkish economy has been driven into recession due to internal dynamics as well as the global crisis, Bahcesehir University Center for Economic and Social Research (Betam) said in its Macroeconomic Outlook report, adding that they were estimating the growth rate in the last quarter of 2008 to register around minus 2 percent.

Turkey's economy began slowing sharply in the second half of 2008 in response to the global economic crisis, having grown around 7 percent annually since a 2001 domestic financial crisis. The country’s third quarter growth stood at 0.5 percent year-on-year, a six-year low.

"We expect that the current recession will continue into the first quarter of 2009. However, from the second quarter on, a moderate revival driven by domestic demand will begin," the report said.

The unemployment rate in the country is expected to reveal a big increase from its current 2,600,000 and exceed 3 million, the report said. The non-agricultural unemployment rate will rise from 14 to 17 percent, a record high, it added.

The report also said Turkey's monthly current account deficit was expected to recede to $1 billion, if the pace of the recession remains at reasonable levels in the first half of 2009 and oil prices hold steady at around $50.

The increase in the end-of-year CPI would be below the target level at 7.5 percent revised in May of 2008, the report also said.

A mild revival is possible in the second half of 2009, which would see Turkey’s inflation falling below 7 percent at the end the year if expectations are met and the country maintains the IMF and EU anchors, the report said.