By Bosphorus News Economy Desk
Türkiye's economy grew 2.3 percent year-on-year in the second quarter, below market expectations and marking a fourth consecutive quarter of slower annual growth, days before the government unveils a new three-year economic program.
Vice President Cevdet Yılmaz said after Monday's data that full-year growth was now expected to finish "somewhat below" the 3.8 percent target in the current Medium-Term Program (MTP). Reuters says the replacement program, covering 2027-2029, will be announced on September 7.
The 2.3 percent reading compared with a 2.9 percent median forecast in a Reuters poll. First-quarter GDP was revised to 2.6 percent, putting growth across the first half of 2026 at 2.5 percent.
On a seasonally and calendar-adjusted basis, GDP rose 1.1 percent from the previous quarter.
Agriculture Rises as Construction Contracts
Agriculture, forestry and fishing recorded the fastest annual increase among economic activities, rising 13.3 percent. Information and communication grew 8.6 percent and industry expanded 2.4 percent.
Construction contracted 1.9 percent from a year earlier. Yılmaz linked the decline partly to the winding down of the exceptional rebuilding cycle after the 2023 earthquakes, saying reconstruction in the affected provinces was now largely complete. Construction investment fell 0.9 percent.
Household consumption increased 3.5 percent year-on-year, while government consumption declined 1.8 percent. Gross fixed capital formation rose 0.6 percent.
At current prices, second-quarter GDP reached 19.87 trillion lira, equivalent to $438.35 billion. Yılmaz said annualized GDP stood at $1.71 trillion, up from $1.6 trillion in 2025.
Imports Fall Faster Than Exports
Exports of goods and services fell 3.4 percent from a year earlier, while imports declined 6.4 percent.
The larger fall in imports meant net exports contributed 0.6 percentage points to second-quarter growth. Economists cited by Reuters said it was the first positive contribution from net external demand in six quarters.
They estimated that domestic demand contracted 1.3 percent from the previous quarter as tight monetary and fiscal policy continued to restrain spending.
Treasury and Finance Minister Mehmet Şimşek said he expected growth to strengthen gradually as disinflation progressed and global conditions became more supportive.
Government Flags 2026 Target Shortfall
The current 2026-2028 MTP projects growth of 3.8 percent this year. The Reuters poll accompanying Monday's GDP data put the market's full-year forecast at 3.05 percent.
Yılmaz's statement puts the government on record expecting an undershoot before the replacement program is published. He cited wars and geopolitical tensions in the region, weaker growth expectations among Türkiye's trading partners and wider global uncertainty among the pressures facing the economy.
Brent crude also returned above $90 on Monday after renewed US-Iran fighting around the Strait of Hormuz, well above the oil prices built into the government's existing medium-term forecasts.
The growth data therefore reaches Ankara as officials are already rewriting other assumptions in the same program, from inflation to energy costs.
Türkiye has now recorded annual economic growth for 24 consecutive quarters. The first half nevertheless leaves the economy expanding 2.5 percent with the government's 3.8 percent full-year target already expected to be missed.
The current program still carries 3.8 percent growth for 2026. The September 7 update will show how far Ankara brings that number down.
Sources: Turkish Statistical Institute, Vice Presidency of Türkiye, Treasury and Finance Ministry, Reuters, Anadolu Agency, Bosphorus News review and reporting.