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.


Poland to stop importing gas from Russian state provider

Updated 1 min 45 sec ago

Poland to stop importing gas from Russian state provider

  • Poland has been working to reduce their dependence on Russian energy sources
  • The Polish company will terminate the contract as of Dec. 31, 2022
WARSAW: Poland’s state gas company said Friday it has notified Russia’s Gazprom that it will not extend a long-term deal on gas imports when it expires in three years.
The announcement comes as Poland has been working to reduce its dependence on Russian energy sources, which Moscow has sometimes used as a tool of political pressure on its partners.
The efforts to reduce dependency include striking long-term contracts for deliveries of liquefied natural gas from the United States, Qatar and other countries, as well as developing a new pipeline with Norway for deliveries from the North Sea.
The Polish company, PGNiG, said that, in line with the provisions of the deal, it had sent Gazprom, which is controlled by the Russian state, notice that it will terminate the contract as of Dec. 31, 2022. It said Poland will continue to have enough energy after that date.
Poland has repeatedly said that the financial terms of the Gazprom contract were unfavorable and that it was paying a higher price than others in Europe.
Poland uses some 14 billion cubic meters of gas a year. Under the contract with Gazprom it was obliged to import some 10 billion cubic meters of gas from Gazprom per year.