Türkiye’s economy grew by 3.7% on an annual basis in the third quarter, official data showed on Monday, slowing more than expected as tight monetary policy cooled domestic demand and frost and drought curtailed agricultural output.
The August-October gross domestic product (GDP) grew 1.1% from the previous quarter on a seasonally and calendar-adjusted basis, data from the Turkish Statistical Institute (TurkStat) showed.
The drag on economic activity was largely due to the agriculture, forestry and fishing sector, which shrank 12.7%. Meanwhile, construction sector activity surged 13.9%.
Treasury and Finance Minister Mehmet Şimşek said annual growth in the first nine months was 3.7% and the annualized national income exceeded $1.5 trillion.
The economy was forecast to have grown by about 4.1% in the third quarter and is estimated to grow by 3.6% in 2025 as a whole, according to surveys.
On the expenditure side, household consumption grew 4.8%, and government final consumption expenditure advanced by 0.8%. Gross capital formation rose 11.7% compared to last year.
Meanwhile, net foreign demand was unfavorable as exports fell 0.7% amid a 4.3% increase in imports.
Şimşek said the contraction in agriculture was largely due to the impact of frost and drought, which he said had significantly limited overall growth. Excluding agriculture, growth was 5.6% on an annual basis.
Industrial value-added increased by 6.5%, led by high-technology production, Şimşek wrote in a statement.
The strong growth in the construction sector was primarily due to efforts to rebuild Türkiye’s southeastern region, which was struck by devastating earthquakes in early 2023.
Şimşek also said machinery and equipment investments, crucial for production capacity, increased by 11.3%. He added that the relatively weak trend in global trade caused net external demand to limit growth by 1 percentage point.
He pointed out that the current account deficit to GDP ratio remains at a sustainable level of 1.3%.
Vice President Cevdet Yılmaz said Monday’s figures supported the “importance we attach to fiscal discipline and our efforts to ensure that investments are relatively less affected by the tightening policies.”
“The third-quarter data demonstrates the resilient structure of our economy and our commitment to a sustainable growth path, in line with our balanced growth model.”
The big emerging market economy expanded by slightly revised 4.9% in the second quarter and 2.5% in the first quarter. In 2024 as a whole, it grew 3.3%.
Economists had said a slowdown in private consumption, as well as softer net exports, would impact the third-quarter figure.
Yılmaz said the balanced course in the growth composition would become even more pronounced in the final quarter of the year, with the removal of the temporary momentum that external conditions created on demand.
“Our policies, which ensure the uninterrupted continuation of the disinflation process and focus on increasing investment, production and exports, will continue to be implemented resolutely,” he noted.
Şimşek echoed Yılmaz’s view, saying that the growth is expected to be moderate in the final quarter of the year, and it is expected to be “slightly” above the Medium-Term Program (MTP) target of 3.3% for the entire year.
He emphasized that they expect the increase in economic activity to be more positive in 2026, thanks to more favorable financial conditions and a supportive global economic climate.
“We assess that growth will continue to support the decline in inflation,” he added.
In December last year, the Central Bank of the Republic of Türkiye (CBRT) started cutting interest rates after having kept the main policy rate steady for eight months. Since July, the central bank has cut rates by 650 basis points to 39.5%.
Inflation has dipped to around 33% from as high as 75% in May last year.
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