ISTANBUL: Turkish economic growth slowed to 5.2 percent year-on-year in the second quarter, data showed on Monday, in what officials described as an economic rebalancing before an expected second-half slowdown as Turkey grapples with a currency crisis.
President Tayyip Erdogan has overseen strong growth during his 15 years in power but the economy is now facing challenges after a sharp decline in the lira, triggered partly by concerns about his influence over monetary policy.
In a Reuters poll, the economy had been expected to grow 5.3 percent in the first quarter. The lira firmed to 6.4550 against the dollar after the data from 6.4850 beforehand.
Second quarter gross domestic product (GDP) expanded a seasonally and calendar adjusted 0.9 percent from the previous quarter, data from the Turkish Statistical Institute showed. Last year the economy grew 7.4 percent.
Growth was driven by domestic demand despite a moderate slowdown in consumption and investments in the second quarter but the slowdown will become more visible from the third quarter, said Finance Minister Berat Albayrak.
Rabobank emerging markets forex strategist Piotr Matys said that, given concerns over the economy overheating, the slowdown from 7.3 percent in the first quarter could be seen as encouraging.
“The Turkish economy is widely expected to lose even more momentum in the coming quarters as a result of significant lira depreciation,” he said, adding that attention was focused on the central bank’s rate-setting meeting on Thursday.
Investors expect the central bank to raise interest rates, but the size of the hike will be crucial, Matys added. The bank left rates on hold at its last meeting in July, defying expectations of a hike.
Data last week showed inflation surged to 17.9 percent year-on-year in August, its highest level since late 2003, prompting the central bank to signal it would take action against “significant risks” to price stability.
In the second quarter, the agricultural sector shrank 1.5 percent year-on-year while the industry sector grew 4.3 percent, the construction sector grew 0.8 percent and services expanded 8 percent.
According to a Reuters poll, the economy is expected to grow 3.3 percent in the year as a whole.
The government has been working on stimulus measures to stave off the expected slowdown in the coming quarters. Erdogan, a self-described “enemy of interest rates,” has pushed banks to lend more to boost private spending.
His demands for lower interest rates have fueled concerns that the central bank lacks independence. The lira has tumbled 41 percent against the dollar this year in a slide exacerbated by a bitter diplomatic row with the US.
Officials have said they expect a contraction of the economy in the third quarter and full-year growth of around four percent — below a 5.5 percent government target.
Turkish economic growth dips as lira crisis darkens outlook
Turkish economic growth dips as lira crisis darkens outlook
- Tayyip Erdogan has overseen strong growth during his 15 years in power but the economy is now facing challenges after a sharp decline in the lira
- The government has been working on stimulus measures to stave off the expected slowdown in the coming quarters
Gulf-EU value chain integration signals shift toward long-term economic partnership: GCC secretary general
RIYADH: Value chains between the Gulf and Europe are poised to become deeper and more resilient as economic ties shift beyond traditional trade toward long-term industrial and investment integration, according to the secretary general of the Gulf Cooperation Council.
Speaking on the sidelines of the World Governments Summit 2026 in Dubai, Jasem Al-Budaiwi said Gulf-European economic relations are shifting from simple commodity trade toward the joint development of sustainable value chains, reflecting a more strategic and lasting partnership.
His remarks were made during a dialogue session titled “The next investment and trade race,” held with Luigi Di Maio, the EU’s special representative for external affairs.
Al-Budaiwi said relations between the GCC and the EU are among the bloc’s most established partnerships, built on decades of institutional collaboration that began with the signing of the 1988 cooperation agreement.
He noted that the deal laid a solid foundation for political and economic dialogue and opened broad avenues for collaboration in trade, investment, and energy, as well as development and education.
The secretary general added that the partnership has undergone a qualitative shift in recent years, particularly following the adoption of the joint action program for the 2022–2027 period and the convening of the Gulf–European summit in Brussels.
Subsequent ministerial meetings, he said, have focused on implementing agreed outcomes, enhancing trade and investment cooperation, improving market access, and supporting supply chains and sustainable development.
According to Al-Budaiwi, merchandise trade between the two sides has reached around $197 billion, positioning the EU as one of the GCC’s most important trading partners.
He also pointed to the continued growth of European foreign direct investment into Gulf countries, which he said reflects the depth of economic interdependence and rising confidence in the Gulf business environment.
Looking ahead, Al-Budaiwi emphasized that the economic transformation across GCC states, driven by ambitious national visions, is creating broad opportunities for expanded cooperation with Europe.
He highlighted clean energy, green hydrogen, and digital transformation, as well as artificial intelligence, smart infrastructure, and cybersecurity, as priority areas for future partnership.
He added that the success of Gulf-European cooperation should not be measured solely by trade volumes or investment flows, but by its ability to evolve into an integrated model based on trust, risk-sharing, and the joint creation of economic value, contributing to stability and growth in the global economy.
GCC–EU plans to build shared value chains look well-timed as trade policy volatility rises.
In recent weeks, Washington’s renewed push over Greenland has been tied to tariff threats against European countries, prompting the EU to keep a €93 billion ($109.7 billion) retaliation package on standby.
At the same time, tighter US sanctions on Iran are increasing compliance risks for energy and shipping-related finance. Meanwhile, the World Trade Organization and UNCTAD warn that higher tariffs and ongoing uncertainty could weaken trade and investment across both regions in 2026.
