Turkey's economy grew by 11.0 percent in the first quarter of 2011 from output in the same period last year, outstripping expectations, official data showed on Thursday. The figure placed Turkey in the lead of the G-20 group of world powers and emerging economies, followed by Argentina, which posted first-quarter growth of 9.9 percent.
Market watchers however remained cautious, stressing that domestic consumption shouldered the robust increase in gross domestic product (GDP) and further widened the current account deficit. In seasonally adjusted terms, GDP grew by 1.4 percent from the previous quarter, the Turkish Statistics Institute (TUIK) said.
The retail sector made the greatest progress with an expansion of 17.2 percent year-on-year, with construction and manufacturing also among the main driving forces of the growing economy. The annual growth rate will be no less than seven percent, foreign trade minister Zafer Caglayan said on the NTV news channel, while market watchers put their estimate at 6.2 percent.
In a spectacular recovery from the global crisis, Turkey's economy grew 9.2 percent in the last quarter of 2010, and 8.9 percent throughout the previous year. The growth however has triggered an expansion in the current account deficit as imports rose and Turkey's exports to Europe slowed down, with "hot money" - or capital in short-term speculative accounts - playing a significant part in financing the gap.
Analysts have warned that an external shock under such conditions could abruptly halt the inflow of foreign capital and wreck havoc in the economy. Also Thursday, TUIK announced that Turkey's trade deficit was $10 billion dollars (6.9 billion euros) in May, far beyond expectations.
"This is the largest monthly trade deficit in series and brought 12-month rolling trade deficit to 92.3 billion dollars from 87.2 billion in April," Finansbank said in a research note. Cevdet Cagdas Unal, a Finansbank economist, stressed that, "resident consumption increased by 12.1 percent (year-on-year) and made the highest contribution to headline growth rate with 8.7 percentage points."
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