Azernews.Az

By Bloomberg

Turkey’s economic growth slowed last year as increased borrowing costs curtailed domestic demand.

Gross domestic product expanded 2.6 percent in the fourth quarter, bringing 2014 growth to 2.9 percent, compared with an upwardly revised 4.2 percent a year earlier, the statistics agency said on its website Tuesday. The median estimate in a Bloomberg survey of 14 analysts for the fourth quarter was 2.1 percent. Seasonally-adjusted output rose 0.7 percent from the previous three-month period.

Household demand, which makes up two-thirds of GDP, grew 1.3 percent in 2014, compared with 5.1 percent in 2013. The central bank damped consumer spending when it raised borrowing costs in January last year, and the bank’s partial easing of rates since then has failed to boost the economy, said Bora Tamer Yilmaz, an economist at Ziraat Securities in Istanbul.

“Rising unemployment hit consumer confidence, forcing people to prioritize saving over spending,” Yilmaz said by e- mail before the GDP report. The economy’s loss of momentum is set to extend into 2015, he said.

Turkish President Recep Tayyip Erdogan has repeatedly called on the central bank to bolster the economy with lower borrowing costs. Erdogan’s criticism of Governor Erdem Basci has led to concerns that the government will encroach on the central bank’s autonomy.

Public sector construction spending contracted by 13.4 percent in the fourth quarter, and by 10.8 percent in the year, the largest decline of any subsector measured.

Private companies’ investment in machinery declined 3.7 percent in 2014, while the public sector’s purchases of equipment and spending on construction shrank 8.8 percent, according to official data.

Economy activity has yet to recover from the slowdown last year. Financial volatility during the first quarter of 2015 “slowed growth a bit,” Finance Minister Mehmet Simsek said in an e-mailed statement after the GDP report. Economic expansion will pick up speed once “financial and political visibility increases” following general elections scheduled for June, Simsek said.

The lira weakened 0.2 percent to 2.6117 per dollar at 10:51 a.m. in Istanbul.