Turkey exits recession after election stimulus

Istanbul (AFP) –


Turkey made a tentative exit from recession with 1.3 percent growth in the first quarter, official data showed on Friday, but analysts warned that the recovery may be "short-lived".

The Turkish economy fell into recession for the first time since 2009 when it suffered two straight quarters of contraction to finish last year, after months of turmoil caused by the weakening lira and tensions with the United States.

But economic output from January to March this year grew 1.3 percent compared to the previous quarter -- however it contracted 2.6 percent year-on-year, according to the Turkish statistics office (TUIK).

Analysts said the return to growth was driven by stimulus measures introduced by President Recep Tayyip Erdogan ahead of local elections on March 31, and could be prove temporary.

The government had sought to shore up the lira after it lost close to 30 percent of its value last year, and boosted public spending ahead of the polls.

But markets were spooked over the volatility of the central bank's foreign reserves -- which inexplicably plunged in the run up to the local elections, alarming investors.

The central bank has since vowed to tighten spending, with governor Murat Cetinkaya saying he will take a firm stance against inflation, currently close to 20 percent, and protect its foreign currency reserves.

"The return to growth looks as though it will prove short-lived," the London-based Capital Economics said in a note to clients.

"The sell-off in Turkish financial markets over the past couple of months has caused financial conditions to tighten. And we doubt that government spending will continue to rise at such a rapid pace," it added.

Turkey faces further political instability after the result of the key mayoral vote in Istanbul was overturned.

Erdogan's ruling party complained of irregularities in the Istanbul vote, which was won by an opposition candidate, and the country's election board has ordered a re-run on June 23.

The United States has also warned that Turkey's decision to buy a Russian missile defence system will lead to economic sanctions.