2016 was a difficult year for Turkey. It was a year in which we hoped that we could focus on economic reforms following the November 2015 elections, but instead the agenda was dominated by political developments, including the resignation of the government, an attempted coup, and a proposal to amend the constitution. Furthermore, the continuation of increasingly violent terrorist attacks, the initiation of cross-border military operations in Syria, and domestic repercussions have placed security at the top of the national agenda.
Despite these conditions, the Turkish economy had a relatively good start to the year, growing by 4.5% in the first half of 2016. However, the economy contracted by 1.8% in the third quarter. The growth rate was at 2.2% in the first three quarters. As in previous years, domestic demand continues to fuel growth, while the share of government spending has gradually increased. In fact, the government’s consumption expenditures increased 24% in the third quarter, contributing to a 2.8 percentage point increase in growth. Without this contribution, contraction in the third quarter would have been much larger.