Turkey’s economic growth accelerated to 2.6% y/y in Q4 from 1.9% y/y in the previous quarter, beating the market consensus forecast of a 2% y/y GDP growth. The economy expanded at an annual rate of 2.9% in the whole of 2014, less than the government’s 2014 target of 3.3%. This was also below the 4.2% growth rate recorded in 2013.

On a seasonally and calendar adjusted basis, Turkey’s GDP growth came in at 0.7% q/q, edging up from the 0.5% q/q in Q3. On a calendar-adjusted basis, the economy grew by 2.4% in Q4 versus 2% y/y in Q3.

Domestic demand, which accounted for 67.5% of GDP, recovered in the fourth quarter but investments dropped at a faster pace compared to Q3, data of the statistics office TUIK showed on March 31. TUIK calculated the per capita income for 2014 at $10,404 and for 2013 at $10,822. Households’ final consumption rose by 2.4% y/y in Q4 versus 0.1% y/y in the previous quarter, and 0.4% y/y in Q2. In the first quarter of 2014, households’ consumption registered a 1.3% y/y increase. In the whole of 2014, households’ consumption increased 1.3% less than the 5.1% increase in 2013.

The increase in government final consumption expenditures slowed to 1.7% y/y in the fourth quarter from 6.6% y/y in Q3. Gross capital formation that dropped 0.4% y/y in Q3 fell by 1% y/y in Q4. Private investments rose by 0.9% y/y in the fourth quarter after rising 2.1% y/y in Q3 while public investments fell by 7.3% y/y that came on top of the 10.4% y/y decline.

Exports rose by 3.4% y/y in the final quarter of 2014 versus 7.9% y/y increase in the previous quarter while imports increased by 4.6% y/y after registering a 1.6% y/y decline in Q3.

On the production side; the increase in industrial output slowed to 1.8% y/y in Q4 from 2.9% y/y in Q3 while manufacturing production rose 2.8% after a 2.7% y/y increase in the previous quarter. The construction sector which the government regards as one of the main engines of economic growth, contracted by 2% y/y in Q4 after registering a 2% expansion in Q3. The wholesale & trade industry grew by 1.5% y/y, up from 0.8% y/y while the growth rate of the service industry eased to 3% y/y in Q4 from 3.5% in the previous quarter.

The government expects the Turkish economy to grow by 4% this year and to create an $850bn economy but the markets foresees a more moderate GDP growth of 3%.