ANKARA: Turkey's economy expanded 5 percent in the first quarter, official data showed on Monday, following a sharp rise in government spending and roundly beating expectations on a double-digit increase in exports.
The economy outstripped the 4 percent year-on-year growth forecast of a Reuters poll and was the fastest since immediately before a July 15 failed coup, when the growth rate stood at 5.3 percent.
The strong performance will be a further boost for President Tayyip Erdogan, who won approval to broaden his executive powers in a referendum in April.
The failed coup, in which 240 people were killed, shook Turkey's economy, prompting the government to respond with fiscal stimulus measures. But investors have questioned whether such moves are sustainable and have said more difficult structural reforms are needed.
"Given that the fiscal stimulus was large, we suspect that private investment growth (if any) was quite weak," said Deniz Cicek, an economist at QNB Finansbank, in a note to clients.
"This obviously casts doubt on the sustainability of the ongoing strong growth performance in future once the fiscal stimulus is scaled down due to rising fiscal deficits."
Exports of goods and services increased 10.6 percent year-on-year, while government consumption spending increased 9.4 percent.
The Q1 growth rate represented a 1.4 percent rise on the previous quarter.
The lira firmed to 3.5225 after the GDP figures from around 3.5371 in initial morning trade, while the main BIST 100 share index rose 0.56 percent.
Q2 IN FOCUS
Government ministers said the trend would continue, with Deputy Prime Minister Mehmet Simsek saying that second-quarter expansion would likely be even quicker.
"It can be felt from wherever you look that growth will strengthen further in the second quarter," he told broadcaster NTV in an interview.
Development Minister Lutfi Elvan said 2017 growth was expected to meet the government's 4.4 percent target or even exceed it.
Finance Minister Naci Agbal said private consumption spending and tax cuts would continue to support growth.
Some investors said they expected a slower second half of the year, given the impact of tight policy from the CBRT, Turkey's central bank.
"We still foresee a slowdown in sequential pace of growth in the second half of the year because of lagged effects of CBRT's monetary tightening, growing fiscal deficits and our expectation of tightening in global monetary policies," QNB's Cicek said.
Nonetheless, he said QNB was raising its 2017 growth forecast by 1 percentage point to 4.3 percent.
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