Turkish growth below expectations - FT.com Turkey has announced growth figures that are markedly lower than expectations, in a sign of the challenge the government faces in reviving the country's economy after the end of its recent boom. Gross domestic product grew 1.6 per cent in the third quarter compared with the same period last year, significantly below analysts" consensus forecast of about 2.6 per cent. GDP advanced 2.6 per cent the first nine months of the year on the same period in 2011. The government forecast for the year as a whole is 3.2 per cent, but some economists say such projections will now be revised downwards. "A range of factors is coming together to slow the Turkish economy pretty dramatically," wrote Tim Ash at Standard Bank in a research note, citing the global growth slowdown, the eurozone crisis, the doubling of Turkish interest rates during the year, the impact of the civil war in Syria on Middle East trade routes and the perception of political risk within the country itself. Turkish authorities have deliberately sought to slow the domestic economy, which accounts for about 70 per cent of total economic activity, after overall growth reached what ministers described as unsustainable levels of 8 per cent and above in 2010 and 2011. In a recent Financial Times interview Erdem Basci, the governor of Turkey's central bank, said the shift, effected by interest rate rises and restrictions on lending growth, was the first time the country had managed such a rebalancing in such a smooth fashion. He added that while exports were the source of growth this year, domestic demand would also be a positive contributor next year. But some analysts argue that exports have performed less well than hoped and there is so far little sign of revival in domestic demand. While exports rose 11.9 per cent in the quarter, this was mainly due to gold exports to Iran. These are widely seen as the equivalent of cash transfers rather than genuine exports, since Tehran uses gold to repatriate earnings from gas and oil sales to Turkey because of the problems of its own sanctions-hit banking sector. There is also outside pressure for the trade to stop, not least from the US, where the Senate recently voted overwhelmingly for sanctions on the Turkish-Iranian "gold for gas" trade. Ozgur Altug at BCG Partners in Istanbul noted that the contribution of net exports was much more limited in the third quarter compared with previous quarters, while construction - traditionally one of the motors of the economy - grew only 0.4 per cent in the quarter, compared with 11.3 per cent in 2011. In other figures released on Monday, industrial production fell 5.7 per cent year on year in October, although the contraction was less marked when seasonal factors are taken into account. "The first solid macro data about the fourth quarter is really very disappointing and when we look at the details we observe that almost all export oriented sectors (textile, chemicals, plastics, electrical machinery, motor vehicles) posted serious year-on-year contractions," Mr Altug wrote in a research note. He added that domestic private consumption declined 0.5 per cent in the quarter, while the private sector's capital investment contracted 11.1 per cent. By contrast, public sector investment grew 11.2, contributing to overall growth. Many economists added that the figures would increase expectations of an interest rate cut later this month. The current rate of growth is the slowest since 2009.