Turkey’s economy grew 5.6pc in 2022, pace to slow after earthquakes

Turkey's economy expanded 5.6 per cent in 2022, official data showed on Tuesday, but growth was expected to slow significantly to 2.8 per cent in 2023 after earthquakes this month caused widespread destruction in the south of the country.

The economy had started cooling down in the second half of 2022 with a decline in domestic and foreign demand, partly due to a slowdown in Turkey's main trading partners that hurt exports because of the war in Ukraine, according to Reuters.

Growth stood at 3.5 per cent in the fourth quarter of 2022, down from a revised 4 per cent in the third quarter and 7.8 per cent in the second quarter.

In 2022, finance and insurance activities grew 21.8 per cent, followed by the services sector which rose 11.7 per cent, data from the Turkish Statistical Institute showed. The only contraction was recorded in the construction sector, which shrank 8.4 per cent, the data showed.

To counter the slowdown, the central bank cut its policy rate by 500 basis points at the end of last year and then by a further 50 basis points to 8.5 per cent last week to support growth after the earthquakes that killed more than 50,000 in Turkey and neighbouring Syria.

Gross domestic product growth in 2023 is expected to be 2.8 per cent, based on the median estimate in the Reuters poll. Predictions ranged from 1.2 per cent to 3.9 per cent.

In a poll conducted in January, before the earthquakes, the median estimate for 2023 economic growth stood at 3 per cent.

Business groups and economists have said rebuilding could cost Turkey up to $100 billion and shave one to two percentage points off growth this year.

The two earthquakes that hit on Feb. 6 caused about $34.2 billion in direct physical damage, but total reconstruction and recovery costs facing the country could be twice as high, the World Bank said on Monday.