Turkey’s Economy Has Outgrown Stimulus Program, Erdogan Aide Says

Turkey’s economy is “back on its feet” and no longer needs the stimulus program introduced after last year’s failed coup, a senior adviser to President Recep Tayyip Erdogan said after the latest data showed unexpectedly strong growth.

Measures including backing loans through a credit guarantee fund were needed to spur the output in 2017, but now “fiscal policy and monetary policy should go hand in hand to reduce inflationary pressures,” Hatice Karahan told Bloomberg TV in London on Monday. The attempted coup in July 2016 pushed the economy into a quarterly contraction.

The comments come after data showed gross domestic product surged 11.1 percent in the third quarter from a year earlier, comfortably beating the median estimate of economists in a Bloomberg survey. Seasonally adjusted output rose 1.2 percent from the previous quarter, below the median 1.8 percent estimate of four economists. Consumer inflation accelerated in November to the highest level since 2003.

 “Confidence is returning and it will support growth,” Karahan said, adding that the economy was now less vulnerable to overheating. “Investments are coming back.”

Karahan also reiterated that Turkey’s central bank is independent, and that its tight policy stance is important. Erdogan’s often repeated and unconventional opinion that lower rates could reduce inflation had led to concerns of political interference in the regulator’s decisions. Karahan has previously pointed to an increase in borrowing costs of about 400 basis points this year as evidence of the regulator’s independence.

Sources: Bloomberg with assistance by Constantine Courcoulas