Turkey economy meltdown as recession strikes and inflation hits double digits | World | News

Turkey‘s central bank is weighing up whether to cut interest rates in weeks as the country sees investment and production stifled by high borrowing costs.

The country has seen its GDP shrink by 0.2 percent in the quarter between July and September, according to data from the Turkish statistical agency on Friday, having dropped by the same margin in the previous one.

These two consecutive quarters of negative GDP growth led economists to declare the economy in recession.

The Turkish economy also saw 2.1 percent year-on-year growth in the third quarter, which the agency said was its slowest rate since the pandemic sparked global chaos in the second quarter of 2020.

Meanwhile, household consumption contracted by 0.3 percent quarter-on-quarter, while government consumption also saw a 0.4 percent drop.

Household consumption increased year on year by 3.1 percent and government consumption decreased by 0.9 percent, as per Euronews.

Nicholas Farr, Emerging Europe Economist at Capital Economics told the outlet: “The central bank suggested at its meeting last week that it thought domestic demand was slowing, and today’s data supports this view.

“This could raise expectations that the central bank may cut interest rates as soon as its December meeting,” he added, though he said such a move would be “jumping the gun”.

Turkey also continues to see eye-wateringly high inflation, estimated to be 48.6 percent year-on-year in October.

However, it’s some way down from the 25-year high of 85.5 percent reported in 2022, with some estimates suggesting it was significantly more severe.

The bank central bank says there have been positive signs and that the country is on a path towards lower inflation, as per the Wall Street Journal.

The key rate, which determines bank lending rates and the cost of credit for borrowers, has stayed at 50 percent for eight months, which economists believe has chilled consumption.

November inflation data is due to be published on Tuesday, and they’re lower than anticipated, expectations could be raised that the central bank could soon cut rates, Farr said, as per WSJ.