(Adds contribution to growth, analyst comment, graphic)
By Nevzat Devranoglu and Ali Kucukgocmen
ISTANBUL, Feb 28 (Reuters) - Turkey's economy expanded
5.6% in 2022, official data showed on Tuesday but growth was
expected to slow significantly to 2.8% in 2023 after
earthquakes this month caused widespread destruction in the
south of the country.
The economy had started cooling in the second half of 2022
with a decline in domestic and foreign demand, partly due to a
slowdown in Turkey's main trading partners because of the war in
Ukraine, which hurt exports.
Growth stood at 3.5% in the fourth quarter of 2022, down
from a revised 4% in the third quarter and 7.8% in the second
quarter.
In 2022, finance and insurance activities grew 21.8%,
followed by the services sector which rose 11.7%, data from the
Turkish Statistical Institute showed. The only contraction was
in the construction sector, which shrank 8.4%, the data showed.
Overall consumption contributed 11.5 points to annual
growth, according to economists' calculations. Net foreign trade
and stocks lowered it by 3 and 5.5 percentage points,
respectively.
Indicators before the earthquake suggested that gross
domestic product (GDP) growth had revived with the help of
domestic demand, but risks to annual growth were now on the
downside after the disaster, said Haluk Burumcekci, of
Burumcekci Consulting.
"The size and duration of the earthquake zone's contribution
to all sectors, particularly the manufacturing industry ... will
be critical in shaping the magnitude of the expected slowdown in
growth this year," he said.
The likelihood of a slowdown in January was "quite high" but
stronger growth may be seen in the following quarters as
production gains compensate for losses in other areas,
Burumcekci said.
To counter the slowdown, the central bank cut its policy
rate by 500 basis points at the end of last year and then by a
further 50 basis points to 8.5% last week to support growth
after the earthquakes killed more than 50,000 in Turkey and
neighbouring Syria.
GDP growth in 2023 is expected to be 2.8%, based on the
median estimate in a Reuters poll. Predictions ranged from 1.2%
to 3.9%.
In a poll conducted in January, before the earthquakes, the
median estimate for 2023 economic growth stood at 3%.
Business groups and economists have said rebuilding could
cost Turkey up to $100 billion and shave one to two percentage
points off growth this year.
The two major earthquakes on Feb. 6 caused about $34.2
billion in direct physical damage but total reconstruction and
recovery costs could be twice as high, the World Bank said on
Monday.
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(Reporting by Nevzat Devranoglu and Ali Kucukgocmen; Writing by
Daren Butler; Editing by Edmund Blair, Robert Birsel)
daren.butler.thomsonreuters.com@reuters.net))
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