GNP growth decelerates to lower-than expected 4.7% in Q3. GNP growth decelerated to 4.7% y/y in Q3, from 12.4% in Q1 and 14.4% in Q2, according to the data by Statistics Institute of State. Indeed, a decline in GNP figures was expected based on the previously announced industrial production figures, yet the growth was still quite below the market consensus forecast of 7.9%.
The main reason behind lower-than-expected growth figures was 1.6% y/y contraction in agriculture sector, against 7.5% contraction in Q1, and 3.4% expansion in Q2. As for the industry sector, the growth declined sharply from 10.3% and 14.9% in Q1 and Q2 respectively to 6.6% y/y in July-September. Similarly the expansion in trade was down from 16.3% and 19.1% to 7.1% in the same period.
The data showed that the bottleneck in construction sectors, which started with the devastating earthquake in 1999, continued, and the sector contracted by 1% in Q3. Looking at the expenditures, it is observed that the private expenditures, which soared by 10.6% and 16.4% in Q1 and Q2, grew by a relatively low of 6.7% y/y in Q3.
The increase in investments of private sector similar to consumption expenditures, declined to 35.8% from 60.6% and 68.7% in previous two quarters. Consumption and investment expenditures of the state, which continues to implement tight budgetary policies, pulled down the general level of economic activity as they went down by 7.1% and 11.8% respectively. As the rise in imports that was 16% remained quite higher than the increase in exports that was 4.5%, the GDP growth was recorded at 4.5%. As a result, the ytd GNP and GDP growth came down to 9.7% and 8.7% respectively.
The industrial production figures for October indicate that the deceleration in growth in the industry sector continued in the month. The unemployment and pressure on wages are expected to continue in the last quarter of the year, curbing the domestic demand and thus the economic growth. (It should also be noted that the factors pulling down growth would help to disperse concerns over CA deficit, and support decline in inflation).
The government projection was revised to 10% from the original 5%. It should also be noted that finance minister Kemal Unakitan said after the release of Q3 GNP data, that they expected the growth to reach 9.5-10% this year.