By Canan Sevgili and Nevzat Devranoglu
ANKARA (Reuters) -Turkey’s economy grew 2% in the first quarter of the year, official data showed on Friday, falling short of expectations amid a tight domestic monetary policy and domestic market turmoil prompted by the arrest of Istanbul’s mayor.
First-quarter gross domestic product (GDP) grew 1.0% from the previous quarter on a seasonally and calendar-adjusted basis, data from the Turkish Statistical Institute (TUIK) showed.
In a Reuters poll, the economy was forecast to have expanded 2.3% in the first quarter.
Turkey’s economy had grown 3.0% year-on-year in the fourth quarter of 2024, bringing full-year growth to 3.2% and exceeding forecasts despite the burden of high interest rates.
Economists forecast an expansion of 3% in 2025 as a whole, slightly lower than last year, the poll showed, reflecting the effects of monetary tightening.
In December, the central bank started an easing cycle after having kept the main policy rate steady at 50% for eight months.
Inflation has dipped from as high as 75% last May.
In April, Turkey’s central bank hiked its policy rate by 350 basis points and raised the lending rate to 49% in response to market turmoil that erupted over the arrest of Istanbul Mayor Ekrem Imamoglu, President Tayyip Erdogan’s main political rival.
Finance Minister Mehmet Simsek said disinflation remained on track while the economy showed moderate growth, with a balanced outlook between consumption and investment.
“Preliminary indicators for the second quarter suggest economic activity is continuing at moderate pace” he said on X.
“We are rapidly deploying a comprehensive set of measures to mitigate potential adverse effects in the disinflation process while supporting growth, employment, and exports” he later said in a statement.
PRIVATE CONSUMPTION
Data from TUIK showed a 7.3% growth in the construction field, 6.1% in information and communication, and 4.7% in other service activities.
In a note evaluating the growth data, Burumcekci Research & Consultancy said private consumption continued to provide the main contribution to growth.
“According to the expenditure‐based GDP data, in Q1 private consumption, investment and stock accumulation pushed growth up, while net external demand weighed it down,” it said.
“When we look at the near-term outlook for growth, leading signals indicate a moderate loss of momentum in GDP growth in the second quarter,” it added.
Stocks have been experiencing significant volatility in recent weeks due to the Trump administration’s erratic tariff decisions and the broader global uncertainty stemming from U.S.
trade policies.
Separately, the central bank said in its biannual Financial Stability Report on Friday that the recent tightening of its monetary stance and declining inflation had a positive impact on interest in Turkish lira-denominated assets.
(Reporting by Canan Sevgili in Gdansk and Nevzat Devranoglu in Ankara; Additional reporting by Tuvan Gumrukcu in Ankara; Editing by Jamie Freed and Gareth Jones)
