The Turkish lira has strengthened close to its highest level in a year as second quarter growth comes in higher than expectations.
Editor’s Remarks: Turkish politics may be contentious, but the economy is staging a recovery. Second quarter GDP came in 2.1% higher than the previous quarter, and 5.1% ahead of last year, as exports grew 10.5% and gross capital formation rose 9.5% on a year earlier. Strong demand for exports to Europe and a recovery in tourism contributed to the higher readings. The Turkish currency rose on the news and is now trading at lira3.4 to the US dollar, compared with a low of lira 3.9 at the beginning of this year. While inflation remains high, at above 10% in August, the Erdogan government’s post-attempted coup fiscal stimulus measures have had an effect, and the good GDP data should encourage the Turkish central bank to keep monetary policy tight at its rate-setting meeting later this week to keep a lid on inflation.