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Turkish economic growth weaker that expected in Q3

The latest figures show Turkey’s economy growing at a much weaker pace than expected.

Between July and September gross domestic product increased by 1.7 percent from the same period last year. Economists polled by the Reuters news agency had predicted a rise of 3.0 percent.

Growth from the previous quarter was 0.4 percent.

Turkey’s central bank said it had come solely from exports and remained optimistic for the final quarter of the year.

But at the same time Central Bank Governor Erdem Basci noted the challenges of weak European demand and political tensions in the Middle East and Russia affecting exports.

“Under these circumstances the growth trend is actually good,” he told a news conference to outline the bank’s monetary policy stance for next year.

“But it is not the growth we want. As the central bank we would want growth to be faster.”

A decline in agricultural production was among the main factors which caused the sharper that expected slowing in growth, Basci said.

The ruling AK Party, which has built its reputation partly on rapid economic development, faces a parliamentary election in June and both ministers and President Tayyip Erdogan have repeatedly called for lower interest rates to support growth.

Basci said inflation, the main factor which has prevented the bank from cutting rates in recent months, could fall “very close” to its medium-term target of 5.0 percent by the end of next year, with a strong fall possible in the first four months.

“It is clear that the central bank is inclined to start another easing cycle in 2015 on the back of a slowdown in domestic demand and the disinflationary global environment,” said IS Investment economist Muammer Komurcuoglu.

Timothy Ash at Standard Bank in London said Turkey, heavily dependent on imported energy, was “the big winner” from lower oil prices.

“The central bank seems to expect the base period effect and lower energy prices to drive inflation lower early next year, just in time for parliamentary elections,” he said.