Türkiye’s economy grew 5.7 percent in the first quarter (Q1) of 2024, in line with expectations, according to official data released on Friday. The strong growth was driven by robust domestic demand.
However, growth is expected to slow during the rest of the year as the central bank’s aggressive monetary tightening to combat soaring inflation weighs on economic activity. A Reuters poll predicts the economy will grow 3.15 percent in 2024, lower than the government’s 4 percent forecast announced in September 2023.
Balanced and sustainable growth
Finance Minister Mehmet Simsek stated that thanks to rule-based, predictable policies, the country is heading towards more balanced and sustainable growth this year. “Indicators for Q2 indicate that the balancing of the economy continues. We see balanced growth in 2024, with a positive contribution from net foreign demand,” Simsek said in a statement.
Resilience amid challenges
Türkiye’s economy grew an annual 4.5 percent in 2023 and 4 percent in Q1 of that year, despite a slowdown in main trading partners and devastating earthquakes in February.
The central bank has raised its policy rate by a total of 4,150 basis points since last June, with the latest hike to 50 percent in March, citing deterioration in the inflation outlook. It has kept the benchmark rate steady since then and vowed to act if the inflation outlook worsens.
Read more: Türkiye holds interest rates steady at 50 percent amid persistent inflationary pressures
High inflation outlook
Annual inflation is expected to hit around 75 percent this month, according to a Reuters poll and the central bank. However, it is seen declining in the second half of 2024 due to the tighter monetary policies. In April 2024, annual inflation stood at 69.8 percent year-on-year.
Drivers of strong Q1 growth
Economists attribute the strong first-quarter growth to the annual minimum wage hike and households bringing purchases forward in expectation of higher inflation, ahead of the local elections on March 31, 2024. Additionally, even with tighter monetary conditions, first-quarter gross domestic product (GDP) grew 2.4 percent from the previous quarter on a seasonally and calendar-adjusted basis.
Sectoral performance
In Q1, the total value added increased by 11.1 percent in construction and 5.5 percent in information and communication. Moreover, final consumption expenditure of resident households increased by 7.3 percent. Exports rose 4 percent and imports fell by 3.1 percent in the period.
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