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

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.


Oman said to mull new regional airline

Updated 8 min 3 sec ago

Oman said to mull new regional airline

DUBAI: Oman is considering setting up a new regional airline that could take over domestic operations from state carrier Oman Air, two sources familiar with the matter told Reuters.

A request for proposal was issued this month by state entity Oman Aviation Group for a feasibility study into operating the new airline, “Oman Link,” the sources said.

Setting up a new airline for domestic flights would allow Oman Air to focus on its international network where it competes with large Gulf carriers Emirates, Qatar Airways, and Etihad Airways.

The new airline could partner with Oman Air with both carriers connecting passengers to each other but would have its own independent management, the sources said on the condition of anonymity because the details are private.

Proposals are to be submitted by Nov. 11, one of the sources said.

The new airline would use regional jets for domestic flights and potentially later to other cities in the region where there is not enough demand to fill the larger single aisle jets used by other airlines in Oman.

FASTFACT

Oman Air operates flights to four airports in the country, including the main Muscat International.

Oman Aviation Group and its unit Oman Air did not respond to separate emailed requests for comment.

Oman Air operates flights to four airports in the country, including the main Muscat International, according to its website.

The airline uses 166-seat Boeing 737 jets and 71-seat Embraer E175 aircraft on domestic and regional flights.

Both aircraft types are too costly to consistently operate domestic routes at a profit, according to industry sources.

Oman has been restructuring its aviation sector in recent years. Oman Aviation Group was formed in 2018 and includes Oman Air, Oman Airports and Oman Aviation Services.

A budget, second airline, Salam Air, was launched in 2017. It is owned by Omani government pension funds and the Muscat municipality.

Last week, Eithad and Air Arabia said they were jointly setting up a low cost carrier in Abu Dhabi.