# Turkey’s economy grew 7.6% in Q2 driven by domestic demand, exports
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-08-31
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: Turkey's Economy Grows 7.6% in Q2, Domestic Demand
Meta Description: Discover the latest on Turkey's economic growth, driven by strong domestic demand and exports, but with signs of a slowdown ahead. Get the details now.
URL: https://financedigest.com/turkeys-economy-grew-7-6-in-q2-driven-by-domestic-demand-exportshtml

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By Nevzat Devranoglu and Ali Kucukgocmen

ISTANBUL (Reuters) – Turkey’s economy grew 7.6% year-on-year in the second quarter as expected, extending a hot streak on strong domestic demand and exports, according to data on Wednesday, though economic activity was seen slowing through year end as demand cools.

Gross domestic product (GDP) expanded 2.1% compared with the previous quarter on a seasonally and calendar-adjusted basis, Turkish Statistical Institute data showed.

President Tayyip Erdogan’s [economic plan](https://www.financedigest.com/uae-plans-long-term-economic-ties-with-israel-despite-political-strains.html "UAE plans long-term economic ties with Israel despite political strains") prioritises growth, employment, investment and exports, driven by a series of unorthodox interest rate cuts that sparked a currency crisis and inflationary spiral late last year.

Rising [prices helped drive spending while the falling](https://www.financedigest.com/uk-house-prices-stabilise-after-four-month-fall-halifax-says.html "UK house prices stabilise after four-month fall, Halifax says") lira helped drive exports.

Exports of goods and services increased by 16.4% in the [second quarter compared with a year](https://www.financedigest.com/ericssons-board-rebuked-by-shareholders-at-agm-for-second-year-in-a-row.html "Ericsson’s board rebuked by shareholders at AGM for second year in a row") ago in the chained linked volume index, while such imports increased by 5.8%.

Household consumption added 13.6 percentage points to growth and [foreign demand](https://www.financedigest.com/german-industrial-orders-drop-in-sept-on-foreign-demand-slump.html "German industrial orders drop in Sept on foreign demand slump") raised it by 2.7 points, according to bankers’ calculations.

Jason Tuvey, senior emerging markets economist at Capital Economics, said [measures to support households in the face of soaring inflation](https://www.financedigest.com/factbox-government-measures-to-ease-inflation-pain-2.html "Factbox-Government measures to ease inflation pain") helped prop up consumer spending.

Robust growth in the first half of this year, high global energy [prices and policies to shield households from the surge in inflation](https://www.financedigest.com/uk-shop-price-inflation-hits-record-8-in-january-brc-2.html "UK shop price inflation hits record 8% in January: BRC") mean that inflation will become entrenched and the current account deficit will remain wide,” he said in a note.

![](https://www.globalbankingandfinance.com/wp-content/uploads/2022/08/A-hot-run-for-Turkeys-economy.jpg)

FINANCIAL [SECTOR GROWTH](https://www.financedigest.com/construction-machinery-sector-is-primary-growth-factor-for-industrial-hydraulic-filters-market-unveils-fact-mr.html "Construction Machinery Sector Is Primary Growth Factor For Industrial Hydraulic Filters Market, Unveils Fact.MR")

The financial and insurance sector led growth, expanding 26.6%, [followed by the services](https://www.financedigest.com/multilocal-continues-hiring-spree-following-increasing-demand-for-its-services.html "multilocal continues hiring spree following increasing demand for its services") sector at 18.1% and professional and administrative support services at 11%. The [industrial sector](https://www.financedigest.com/construction-machinery-sector-is-primary-growth-factor-for-industrial-hydraulic-filters-market-unveils-fact-mr-2.html "Construction Machinery Sector Is Primary Growth Factor For Industrial Hydraulic Filters Market, Unveils Fact.MR") expanded 7.8%.

Banks’ [profits soared this year as they continued to lend with rates much higher](https://www.financedigest.com/polish-e-commerce-firm-allegro-eyes-higher-q1-profit.html "Polish e-commerce firm Allegro eyes higher Q1 profit") than the central bank’s one-week repo rate, which it uses to fund the market.

The banking sector’s net [profit in the first seven months of the year](https://www.financedigest.com/crop-merchant-louis-dreyfus-gets-profit-boost-in-volatile-year.html "Crop merchant Louis Dreyfus gets profit boost in volatile year") stood at 207.9 billion lira ($11.4 billion), up 417.2% from the same period last year, data showed on Monday. [Banks’ net interest](https://www.financedigest.com/ecb-raises-interest-rates-again-cuts-bank-subsidies.html "ECB raises interest rates again, cuts bank subsidies") income surged 216% in the same period.

The central [bank unveiled new required bond holdings](https://www.financedigest.com/bank-of-canada-seen-on-hold-even-as-economy-accelerates.html "Bank of Canada seen on hold even as economy accelerates") for lenders last week aiming to bring the rates on corporate loans closer to its policy rate, while consumer loans and mortgages are offered at very high rates.

In a Reuters poll, the [economy was forecast to have expanded 7.5% in the second quarter with full-year growth](https://www.financedigest.com/visa-revenue-growth-slows-more-as-tough-economy-sobers-spending.html "Visa revenue growth slows more as tough economy sobers spending") seen at 4%.

Despite inflation running at 80%, the central [bank cut its policy rate](https://www.financedigest.com/the-recent-bank-of-england-meeting-the-biggest-rate-hike-recession-warning-and-the-fallout.html "The recent Bank of England meeting, the biggest rate hike, recession warning and the fallout") by 100 basis points in August to 13%. It cited indications of a slowdown in the [third quarter](https://www.financedigest.com/greek-residential-property-price-recovery-picks-up-in-third-quarter.html "Greek residential property price recovery picks up in third quarter"), adding that momentum in industrial production and a positive trend in employment must be maintained.

Economists also see growth falling in the second half of the year due to a downward trend in domestic and foreign demand, led by an expected slowdown in Turkey’s [largest trade](https://www.financedigest.com/at-chinas-largest-trade-fair-exporters-worry-about-world-economy.html "At China’s largest trade fair, exporters worry about world economy") partners.

Last year, Turkey’s economy bounced [back strongly from the COVID-19 pandemic](https://www.financedigest.com/as-who-pandemic-pact-talks-begin-poor-countries-on-back-foot.html "As WHO pandemic pact talks begin, poor countries on back foot") and grew a revised 11.4%, its highest rate in a decade. Annual growth in the first quarter of 2022 was [revised to 7.5% from 7.3%](https://www.financedigest.com/french-inflation-revised-upwards-in-february-to-7-3-final-figures.html "French inflation revised upwards in February to 7.3% – final figures"), data showed on Wednesday.

($1 = 18.1900 liras)

(Reporting by Nevzat Devranoglu and Ali Kucukgocmen; additional reporting by Can Sezer; Editing by Jonathan Spicer and Daren Butler)


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