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ISTANBUL, Nov 24 (Reuters) - Turkey's economy is expected to
have expanded 7.5% in the third quarter of the year and is seen
growing 9.5% in 2021, a Reuters poll showed on Wednesday, but
the lira's recent drop and soaring inflation are expected hinder
growth in later months.
Turkey's gross domestic product (GDP) grew a massive 21.7%
annually in the second quarter, rebounding after a sharp
slowdown a year earlier due to the COVID-19 restrictions.
The median estimate of 15 economists in a Reuters poll stood
at 7.5% for year-on-year growth in the third quarter of the
year. Forecasts ranged between 5.1% and 11.4% growth.
The boom in the economy has fed into double-digit inflation,
which has risen close to 20% in recent months and is expected to
rise further as the central bank forges on with rate cuts.
The central bank has slashed its policy rate by 400 basis
points to 15% since September as part of an easing cycle which
economists say is reckless given soaring inflation and a lira
that fell as much as 45% since the beginning of the year.
President Tayyip Erdogan, who is staunchly against higher
interest rates, has said Turkey will prioritise growth,
employment and investments over high borrowing costs and a low
Paradoxically, economists say the rate cuts could eventually
have a negative impact on growth in coming months.
Such reductions in this environment are counterproductive,
said Selva Demiralp, director of the Koc University-TUSIAD
Economic Research Forum.
"If you cut the policy rate in an inflationary environment,
there might initially be some positive impact on growth," she
said, adding that the current situation in Turkey is a risk for
growth and financial stability.
"Eventually, the increase in demand due to lower interest
rates is immediately offset by the decrease in demand due to
higher inflation and elevated risks," said Demiralp, a former
U.S. Federal Reserve economist.
She described the central bank's latest moves as a
The median estimate of 15 economists for growth in 2021 as a
whole stood at 9.5%, with forecasts ranging between 8.9% and
The government has recently said it expects to record
double-digit growth this year, revising up an earlier estimate
The Turkish Statistical Institute will announce third
quarter GDP data at 0700 GMT on Nov. 30.
(Reporting by Ali Kucukgocmen; Editing by Toby Chopra)