GDP in Turkey, Bulgaria Contracts

By Christopher Emsden
The Wall Street Journal

Turkey and Bulgaria, the two states in the Balkan region that haven't received funds from the International Monetary Fund, said Thursday their economies contracted further in the second quarter.

In Turkey there were some signs of improvement. Supported by cheaper borrowing costs and tax cuts, Turkish gross domestic product fell by 7% in the second quarter from a year earlier, half as fast as the 14% drop for the first three months of the year.

But at the same time, Bulgarian GDP worsened, declining 4.9% from a year earlier in the second quarter, faster than the 3.5% drop in the first three months of the year, the statistics office in Sofia said Thursday.

Marring Turkey's good news was a decline in industrial-capacity utilization which fell to 69.7% in August from 72.3% in July, ending a sharp rebound since January, and raising concerns the recovery isn't sustainable.

"Exports and private investment have yet to produce a meaningful turnaround, while a consumer-led recovery seems unlikely in view of the weak employment and real-wage trends," said Ilker Domac, an economist for Citigroup Inc. in Istanbul.

Like many major economies, Turkey essentially bought its growth, offering tax cuts on car and appliance purchases as part of a stimulus program. That has come at a cost and is expected to push the government budget deficit to 6% of GDP, about four times as high as the year-earlier deficit.

Despite the rising debt, the Turkish government has so far declined ask the IMF for funding. Central bank Governor Durmus Yilmaz and analysts said the country won't need the fund provided the government formulates a credible medium-term fiscal plan.

We need your support so Novinite.com can keep delivering news and information about Bulgaria! Thank you!