Turkey Growth Outpaces China Piling Pressure on Central Bank
By Steve Bryant and Selcuk Gokoluk -
Turkey’s economic growth accelerated to 11 percent in the first quarter, outpacing
China’s and adding to the pressure on the central bank to rein in a credit-driven boom that may threaten financial stability.
The state statistics office in Ankara announced the figures today, at the same time it reported a record trade deficit for May. Growth in the quarter was faster than in any other member of the Group of 20 developed economies. The median estimate in a Bloomberg survey of 13 economists was 9.7 percent, and the previous quarter’s growth rate was 9.2 percent.
China’s economy grew 9.7 percent in the first quarter.
Central bank Governor Erdem Basci says the boom poses risks to stability as the current-account deficit widens to record levels. Basci’s solution has been to impose limits on bank lending without raising
interest rates, a move he says would strengthen the currency and hurt exports. Pressure for a more orthodox response may escalate after today’s figures.
The first-quarter boom “underlines the need for monetary tightening in the future, along the lines of conventional interest-rate moves,”
Nigel Rendell, an economist at
RBC Capital Markets in London, said in e-mailed comments. This is “very strong growth in a world where economic growth is all too frequently lacking.”
The lira fell 0.2 percent to 1.6247 at 11:30 a.m. in Istanbul. Yields on benchmark two-year lira bonds fell 3 basis points to 9.17 percent.
Election Win
The economy grew 1.4 percent from the previous quarter, according to seasonally adjusted figures announced today. That was slower than the 3.6 percent quarter-on-quarter growth in the last three months of 2010.
The expansion in the $735 billion economy helped Prime Minister
Recep Tayyip Erdogan win a third term in national elections on June 12. Budget spending, excluding interest payments on debt, rose an annual 12 percent in first five months of the year, faster than the 8 percent growth that the government plans for 2011.
Basci is seeking to rein in the boom using bank reserve requirements rather than interest-rate increases that may lure more short-term cash to the country, strengthen the currency and further weaken exports already hurt by the slowdown in
Europe, Turkey’s main market.
The 12-month current-account gap more than doubled from a year earlier to $63.4 billion in April, the most since records began in 1984 and equivalent to about 9 percent of GDP. The monthly
trade gap rose to a record $10 billion in May, the government statistics office said today.