Turkey GDP grew 5.9% in Q3, higher than forecast

Turkey's economy expanded by a more-than-expected 5.9 per cent in the third quarter, driven by household spending, data showed on Thursday, but activity should slow through the year-end after aggressive monetary tightening to cool demand.

Gross domestic product (GDP) grew 0.3 per cent from the previous quarter on a seasonally and calendar-adjusted basis, data from the Turkish Statistical Institute showed.

In a Reuters poll, the economy was forecast to have expanded 5.6 per cent annually in the third quarter, after which it should cool given the central bank has hiked rates to 40 per cent from 8.5 per cent since June as part of a sharp U-turn toward policy orthodoxy.

The annual reading was the highest since the second quarter of last year. Growth in the second quarter of this year was revised up to 3.9 per cent from 3.8 per cent, the data also showed.

The construction and industrial sectors expanded by 8.1 per cent and 5.7 per cent respectively, while the agriculture sector grew by only 0.3 per cent, the data showed, in part reflecting fallout and rebuilding after this year's devastating earthquakes in the southeast.

Authorities have tightened monetary policy and begun to untangle a raft of financial regulations in order to cool overheated demand and to rein in inflation, which has risen above 61 per cent and should climb until May before dipping.

The Treasury Ministry said on Thursday such policies will continue until both inflation and the current account deficit decline permanently, adding that the economy was on track toward balanced growth.