Wednesday April 8, 01:26 PM
Turkey's industrial output plummets, economy slows
By Hande Culpan
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ANKARA (AFP) - Turkey's industrial output plunged by a record 23.7 percent in February compared to activity 12 months ago, official data showed Wednesday, strengthening expectations that the once-booming emerging market economy is heading into recession.
Wednesday's slump was the seventh month in a row that industrial production declined amid contracting domestic demand and falling exports as Turkey is hit by the global economic downturn.
The data, published by the Turkish Statistics Institute, showed that the biggest contraction was in the automative sector which plummeted by a staggering 58.7 percent. Manufacturing industry output was down by 25.9 percent in total, the institute said.
"We expect a similar output performance in March. However we expect some recovery starting in April as the recently introduced tax cuts have led to inventory depletion in some of the key industries such as the automotive," Yarkin Cebeci, a senior economist at JP Morgan, said.
Last month, the Turkish government announced tax cuts in the housing, automotive, appliances and electronics sectors for three months in a bid to revive falling demand.
The February figures also increase pressure on the central bank to cuts its key rates as the decline in demand pulls down inflation which hit 7.89 percent in March.
"This result supports the case for another 50 basis point cut by the Central bank in this month?s monetary policy meeting," Cebeci said.
In March, the central bank trimmed its key borrowing rate to 10.5 percent in the fifth consecutive cut since November.
Analysts underlined that the figures point to a deeper contraction in gross domestic product (GDP) in the first quarter of the year after the economy slumped a massive 6.2 percent in the last quarter of 2008.
Gains the first three quarters of 2008 helped GDP end 2008 with a 1.1 percent growth.
"We expect gross domestic product to plunge 9.0 percent in the first quarter, 5.1 percent in the second quarter and 3.1 percent in the third quarter and then grow 3.6 percent in the last quarter of the year," Cebeci said.
The scenario sees Turkey's economy contracting by 3.4 percent in the whole of 2009, he added.
The Turkish economy had been one of the strongest in the region in recent years, having grown by 8.4 percent in 2005, 6.9 percent in 2006 and 4.7 percent in 2007 under recovery programmes backed by the International Monetary Fund in the wake of two severe financial crises.
The government is under pressure to finalize a long-delayed fresh deal with the IMF to weather the crisis and has said that it will invite an IMF team this month to conluded negoations which had been suspended since January.
Financial markets and business circles have long been pressing for the deal, but the government is under fire for dragging its hells on the deal ahead of local elections on March 29 which saw the ruling party lose support for mismanaging the economic crisis.
"An IMF deal...is likely to help improve production and growth dynamics for the second half of 2009," Ata Yatirim said in a research note.
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