Turkey: Robust Economy, Troubling Statistics

Statistics released today show that Turkey's economy grew 11 percent this past quarter, making it the world's fastest growing economy. 

The growth figures came as Turkstat simultaneously published figures confirming that Turkey's foreign trade deficit—the key driver of its mushrooming current-account gap—widened to $10.06 billion on the year in May, significantly above analysts' expectations and reaffirming market concerns that Turkey's rapidly growing economy is imbalanced.

Turkish stocks listed on Istanbul's main share index gained 0.3% on the data, before falling into negative territory. The lira, the poorest performing emerging-market currency in 2011, also quickly fell into negative territory against the dollar after initially strengthening modestly on the news.

Economists said the numbers showed that Turkey's economy continued to fire on all cylinders, but they underlined that the central bank's policy failed to slow growth.

"Bunker-busting numbers these; the Turkish economy is absolutely booming, making it the Eurasian Tiger," said Timothy Ash, emerging-market economist at RBS in London. "More worrying, though, was the trade data [that were] also released, which showed a record high—or thereabouts—trade deficit for May. Absolutely no sign that the economy is slowing [and] responding to the CBRT's unorthodox policy response."

Turkey has a long history of financial meltdowns, banking collapses and International Monetary Fund bailouts, but its policy makers now face a different challenge, one brought on by Turkey's stellar economic success and gains in prosperity.