Turkey’s economic growth fizzles

Turkey’s second-quarter growth rate came as a big disappointment to Ankara, hushing boastful ministers who had bragged of outperforming European economies. When gross domestic product (GDP) was reported to have grown 4.7% in the first quarter, Economy Minister Nihat Zeybekci declared on television, “We’ve grown faster than 33 European countries. Any slowdown in the coming quarters is out of the question.”

Only three months after Zeybekci's June 10 statement, the rate fell to 2.1%, less than half of the 4.7% that Zeybekci proclaimed as unshakable. This new data, announced last week, left not only the minister embarrassed, but Ankara’s year-end target of 4% out of reach.

Zeybekci also said the following in June: “Some institutes and credit rating agencies have been revising downward their growth forecasts for Turkey. Such an eventuality is impossible technically and arithmetically. We are a government that feels the pulse of all [economic] actors and dynamics. We are equally confident for the second and third quarters. Turkey will boost its exports, output and growth rate and move ahead, strengthening this chain.” All Zeybekci's ambitious projections, however, came to naught, with the economy's overseers already at work on a downward revision of the year-end target.

Another danger also lurks. The government has made it a habit to blame any failure on imaginary enemies, among them “interest rate lobbies” and credit rating agencies. If this populist game continues, and the Central Bank remains under government pressure to cut interest rates, Turkey's lira risks a free fall, beyond any control. This, however, appears to be where the government is headed, with Zeybekci blaming the second-quarter slowdown on the Central Bank’s high interest rate policy.