A money changer counts Turkish lira banknotes at a currency exchange office in Istanbul (file). Banks’ profits soared this year as they continued to lend with rates much higher than the central bank’s one-week repo rate, which it uses to fund the market.
Turkiye’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 yesterday, 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 Recep Tayyip Erdogan’s economic plan 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 lira helped drive exports. Exports of goods and services increased by 16.4% in the second quarter compared with a year 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 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 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 mean that inflation will become entrenched and the current account deficit will remain wide,” he said in a note. The financial and insurance sector led growth, expanding 26.6%, followed by the services sector at 18.1% and professional and administrative support services at 11%. The industrial sector expanded 7.8%. Banks’ profits soared this year as they continued to lend with rates much higher 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 stood at 207.9bn lira ($11.4bn), up 417.2% from the same period last year, data showed on Monday.