ISTANBUL (Reuters) - Turkey’s economy is expected to have grown 5.4% in the first quarter of the year, a Reuters poll showed on Friday, displaying the economy’s strong momentum driven by a lending spree before the coronavirus outbreak hit.
Turkey left behind a recession in the third quarter of last year and rebounded strongly in the fourth quarter of 2019, growing 6% year-on-year, mainly thanks to a surge in lending as the central bank slashed its policy rate in the second half of the year.
The central bank had hiked its policy rate to 24% in 2018 when it faced a currency crisis that at one point halved the value of the lira against the dollar. It began lowering its rate in July last year and has since cut by 1,575 basis points to 8.25%.
Cheap credit led to a lending spree, spearheaded mainly by state banks, while private banks were also pushed to give out more loans.
The median estimate in a Reuters poll of 14 economists for GDP growth in the first quarter of the year stood at 5.4%. Estimates ranged between 6.4% and 4.4% growth.
Despite the strong growth in the first quarter, the economy is expected to contract this year due to the sharp downturn brought on by the coronavirus outbreak, which hit Turkey in mid-March.
The median estimate of 12 economists for annual GDP growth in 2020 was for a contraction of 0.75%, with estimates ranging between a contraction of 5.5% and expansion of 0.9%.
The median in a previous poll was for a contraction of 1.4%.
In an effort to slow the spread of the new coronavirus, Turkey closed its borders, halted flights and imposed weekend lockdowns, all of which led to sharp declines in trade, tourism and other key sectors. Some factories also temporarily stopped operating.
The government had estimated 5% growth for this year before the coronavirus outbreak hit. Economy officials say the economy could still record limited positive growth.
The Turkish Statistical Institute will release the GDP data for the first quarter at 0700 GMT on May 29.
Reporting by Ali Kucukgocmen; Editing by Daren Butler