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Turkish economy grows 4.3% in Q1 despite turmoil

The Turkish economy grew at an annual rate of 4.3 per cent in the first quarter of 2014 despite political turmoil and a sharp rise in the interest rates, official data showed on Tuesday.

ISTANBUL: The Turkish economy grew at an annual rate of 4.3 per cent in the first quarter of 2014 despite political turmoil and a sharp rise in the interest rates, official data showed on Tuesday.

On a quarterly basis, output grew by 1.7 per cent in the first three months of the year over the previous quarter, according to the Turkish Statistics Institute (TurkStat).

A surge in exports was the main driver of the growth, it said.

The government is targeting four-per cent growth for the whole of this year.

But analysts have revised their forecasts downwards.

In April, the International Money Fund slashed its 2014 growth target for Turkey from 3.5 per cent to 2.3 per cent, saying higher interest rates would hurt domestic demand.

The Turkish economy, which has experienced rapid growth under Prime Minister Recep Tayyip Erdogan's 11-year rule, took a beating in the second half of last year and the beginning of this year when the lira plummeted.

A corruption scandal in December ensnared key government allies and gave an extra twist to a general shift of funds out of emerging markets such as Turkey.

Turkey's central bank raised interest rates sharply at the end of January as it battled to defend the lira.

But it trimmed one key rate last month amid pressure from Erdogan's government to cut the rates to sustain growth and keep inflation in check.

On Tuesday, the prime minister praised Turkey's economic growth in the first quarter, saying it came "despite the coup attempts on December 17 and 25 which threatened the country's economic stability".

But analysts urged caution.

"The Turkish economy held up well in Q1, in spite of a deepening political crisis and an aggressive hike in interest rates," said William Jackson of the London-based Capital Economics.

"Growth was boosted by an improvement in Turkey's gold trade balance, which is unlikely to last," he said.

"However ... there has been little improvement in the country's existing vulnerabilities. The upshot is that the economy is likely to struggle over the coming quarters."

Erdogan's ruling Justice and Development Party scored a stunning victory in the March 30 local elections, boosting his confidence to run for presidency in August.

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