At a time when the people of Turkey are in a state of shock from the economic crisis plaguing households, with the basic wage falling to around 200 euros due to the devaluation of the pound, the economy of the neighboring country seems to have expanded at the fastest pace in compared to most of its competitors in the third quarter of the year.
In any case, galloping inflation and the pound slump due to lower central bank interest rates pose a real threat to incomes and long-term growth.
Figures released today are expected to show that the $ 765 billion economy outperformed most G20 nations by 7,4% year-on-year, according to the median forecast of economists surveyed by Bloomberg. In the second quarter of 2021, Turkish GDP grew by 21,7% on an annual basis after the contraction it had marked with the peak of the pandemic. This is the largest increase in Turkish GDP since at least 1999.
"Domestic demand has strengthened" thanks to faster vaccinations and the opening up of the economy, which has become visible in retail sales, "said Fatih Akcelik, an economist at Deutsche Bank. Strong exports and better tourism revenues helped, he said.
Under pressure from President Erdogan, the central bank has cut lending rates by 4 basis points since last September. Erdogan, whose popularity has plummeted ahead of the 2023 election, described cutting interest rates as a key option for an economy with more investment and job creation. However, this political stance led to a sharp devaluation of the pound and a faster rise in prices.
Real GDP growth does not translate into a higher standard of living for many people, as inflationary pressures lead to reduced purchasing power for many households.
The Turks are now queuing for a loaf of bread. For some time now, three municipalities, Izmir, Istanbul and Ankara, have been offering so-called "cheap" bread, at half the price of what is sold in bakeries, and in recent days their sales have risen sharply.
Last week, the pound plunged to 13: 1 against the US dollar, recording the second biggest drop in 20 years due to Erdogan's demand for lower borrowing costs.
The Turkish lira has depreciated by more than 40% in November and 65% since February 2021, food prices have skyrocketed by more than 50% -60% - this is the country's unofficial inflation.
A weaker currency means a drop in per capita GDP in dollar terms, with inflation already approaching 20%.
Tighter financial markets and significantly lower expectations may reduce domestic demand and become even more apparent in 2022 GDP, said Inants Sozer, an economist at Virtus Glocal Consulting.
Central Banker Sahak Kavtsioglu will attend the next central bank meeting on December 16th, with Erdogan insisting on further cuts in interest rates.
