ISTANBUL, Feb 28 (Reuters) – Turkey’s economy grew 5.6% in 2022, official data showed on Tuesday, but growth is expected to slow sharply to 2.8% in 2023 after earthquakes hit the south this month of the country had caused far-reaching destruction.
The economy had started to cool off in the second half of 2022 with a drop in domestic and external demand, partly due to a slowdown in Turkey’s main trading partners, which hurt exports due to the war in Ukraine.
Growth was 3.5% in the fourth quarter of 2022, after a revised 4% in the third quarter and 7.8% in the second quarter.
In 2022, financial and insurance activities grew by 21.8%, followed by the service sector, which grew by 11.7%, data from the Turkish Statistical Institute showed. The only decline was seen in the construction sector, which shrank 8.4%, the data showed.
To counter the slowdown, the central bank cut interest rates by 500 basis points late last year and then another 50 basis points to 8.5% last week to support growth in the wake of the earthquakes that killed more than 50,000 people in Turkey and the United States neighboring countries died Syria.
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Gross domestic product growth in 2023 is expected to be 2.8% based on the median estimate from the Reuters poll. Forecasts ranged from 1.2% to 3.9%.
In a survey conducted in January before the earthquakes, the median estimate for economic growth in 2023 was 3%.
Business groups and economists have said it could cost Turkey up to $100 billion to rebuild and shave one to two percentage points off growth this year.
The two Feb. 6 earthquakes caused about $34.2 billion in direct physical damage, but the total reconstruction and recovery costs for the country could be double that, the World Bank said on Monday.
Reporting by Nevzat Devranoglu; writing from Daren Butler; Edited by Ali Kucukgocmen and Edmund Blair
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