Turkish economy shrinks 2.6% in Q1 as recession bites

The Turkish lira has come under renewed pressure in recent months as investors fretted about the threat of new US sanctions. (Reuters)
Updated 31 May 2019
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Turkish economy shrinks 2.6% in Q1 as recession bites

  • Turkey has been rocked by a 36 percent tumble in the lira’s value against the dollar since the end of 2017
  • Weakness in the construction and industrial sectors dragged badly on the economy in the first quarter

ISTANBUL: The Turkish economy contracted 2.6 percent year-on-year in the first quarter, in line with expectations, as the official data reinforced the country’s slide into recession after last year’s currency crisis.
The major emerging market economy, which has a track record of more than 5 percent growth, has been rocked by a 36 percent tumble in the lira’s value against the dollar since the end of 2017. Inflation shot up last year and the central bank hiked rates to slow economic activity.
A Reuters poll forecast an annual shrinkage of 2.5 percent in the latest quarter.
Compared to the previous quarter, first quarter GDP expanded a seasonally and calendar-adjusted 1.3 percent, the Turkish Statistical Institute data showed.
The data also confirmed that the Middle East’s largest economy contracted 3 percent year-on-year in the fourth quarter, its worst in nearly a decade, capping a year in which it logged 2.6 percent overall growth.
Weakness in the construction and industrial sectors dragged badly on the economy in the first quarter, while agriculture expanded.
Last year’s currency crisis, brought on by concerns over a diplomatic row with Washington and the independence of the central bank, ended years of a construction-fueled boom driven by cheap foreign capital.
The lira has come under renewed pressure in recent months as investors fretted about the threat of new US sanctions, uncertainty over local election results, declining central bank reserves and a trend of Turks ramping up foreign holdings.
Initial data for the second quarter has shown continued poor sentiment regarding the economic outlook.
The Purchasing Managers’ Index (PMI) for manufacturing fell to 46.8 in April from 47.2 in March, while consumer confidence tumbled to 55.3 points in May, its lowest level since the data was first published in 2004.
Official data on Friday showed the foreign trade deficit narrowed 55.6 percent year-on-year in April to $2.982 billion, with exports rising 4.6 percent while imports slid 15.1 percent.


Google puts up $1B to ease housing headaches it helped cause

In this May 1, 2019, file photo, a woman walks past a Google sign in San Francisco. Google is making a $1 billion commitment to address the soaring price of housing in the San Francisco Bay Area, a problem that the internet company and its Silicon Valley peers helped create as the technology industry hired tens of thousands of high-paid workers. (AP)
Updated 55 min 7 sec ago
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Google puts up $1B to ease housing headaches it helped cause

  • A report by Working Partnerships called upon Google to build more than 17,000 homes in the area to help offset the anticipated price increases caused by the new campus

SAN FRANCISCO: Google is pouring $1 billion into easing the high-priced housing headaches that it and its Silicon Valley peers helped give the San Francisco Bay Area.
The pledge announced Tuesday by Google CEO Sundar Pichai consists of a $250 million investment fund and $750 million of company-owned land. It will be used to build at least 15,000 homes that will include low- and mid-income housing.
Google’s commitment eclipsed a recent $500 million pledge made by Microsoft to combat housing shortages in the Seattle area and a $500 million housing fund created by a consortium including Facebook.
Google is extending a helping hand as it draws up plans to expand into sprawling offices beyond its headquarters in Mountain View, California. That suburban city of roughly 80,000 people has been swamped with affluent tech workers since Google moved there shortly after its 1998 inception.
Since then, Google’s payroll has swelled from a few dozen workers to the more than 103,000 people now working for it and its corporate parent, Alphabet Inc. Nearly half of those workers are based in the Bay Area.
While Google has been expanding, so have a wide variety of other technology companies, including Apple, Facebook, Oracle, Salesforce and Netflix — all of whom also lavish their workers with six-figure salaries and stock options that can yield multimillion-dollar windfalls.
The high incomes have resulted in bidding wars for the limited supply of homes in the Bay Area that can only be afforded by the affluent, a group increasingly dominated by tech workers, while people employed in other lines of work struggle to make ends meet on more modest incomes.
That is making it impossible for people on the lower end of the economic spectrum to buy a home in the Bay Area, where a mid-priced house sold for $990,000 in April, according to the California Association of Realtors, a trade group. In 1999, a mid-priced home sold for $308,000.
It’s even worse in San Francisco, a city from which many tech workers ride company buses to the Silicon Valley suburbs. A mid-priced house in San Francisco sold for nearly $1.7 million in April, according to the realtors’ group, quadruple the price of 20 years ago.
Google’s next big project will be in the Bay Area’s most populous city, San Jose, where it plans to build a corporate campus consisting of offices and housing where 15,000 to 20,000 of its employees will work and live.
The project faced resistance from community activists worried about its effect on housing prices. Last week, a report by Working Partnerships called upon Google to build more than 17,000 homes in the area to help offset the anticipated price increases caused by the new campus. The report by the labor-union backed labor group envisions apartment rent increases of $235 million by 2030 if action isn’t taken.
“For several months, we have encouraged Google to make a bold commitment to address our region’s affordable housing challenge,” San Jose Mayor Sam Liccardo said in a statement applauding the company’s $1 billion pledge.