Economy of Turkey unexpectedly shrank in the third quarter mainly due to a decline in consumption. This clearly shows that the coup attempt in July and the ensuing political crisis outweigh the consumer confidence. Third quarter is the first decrease in GDP of Turkey in seven years. The decline amounted to 1.8% yoy in the period from July to September, according to data of the statistical office, beating the median forecast of economists for an expansion of 0.3%.
The consumer confidence and business sentiment, declined after July 15, when was made a coup attempt against President Recep Tayyip Erdogan. This led to the decline and investment as the government began to conduct purge of suspected enemies. The measures cost the jobs of thousands of people and many Western governments have criticized the purge.
The consumer spending decreased by 3.2% yoy in the third quarter, indicating that the attempted coup loss of business activity. The government spending on wages, goods and services increased by 23.8% and offset the decline in investment, which shrank by 0.6%.
Last week, the Turkish Statistical Office announced that the changes of methodology for estimated GDP to keep up with international standards and to measure more precisely the pace of economic activity. As a result, the base year used to calculate GDP changes from 1998 to 2009. The new method further enhances contraction on an annual basis and makes it difficult to compare with previous performances. Under the new methodology the growth in previous quarters expect higher so this year could reach the government target of 3.2% economic growth.
The increase in the first two quarters of the year was revised accordingly from 4.7% to 4.5% and from 3.1% to 4.5% also.
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