Turkey Economy Shrinks for First Time since 2009

The Turkish economy shrank by nearly two percent in the third quarter as consumer spending and exports plunged, data showed Monday, the first year-on-year contraction in 27 quarters since 2009.

The Turkish Statistics Office said gross domestic product (GDP) fell 1.8 percent compared with the same period in 2015 causing an immediate fall in the lira.

The contraction follows weaker consumer spending which the office said decreased by 3.2 percent in the last quarter while exports of goods and services fell by 7.0 percent.

The release is one of the strongest signs yet that political instability in the aftermath of the July 15 coup bid is affecting consumer confidence.

This is the first set of numbers after the office said last week it would change the way it calculates GDP figures in line with European Union Regulations (ESA 2010). 

Thus the base year used is now changed from 1998 to 2009 and the changes mean in nominal terms, Turkey’s GDP is now larger by 20 percent, Ozgur Altug at BGC Partners said in a note.

The last time Turkey recorded negative growth was in 2009 when the country entered recession.

Monday's figures also come as the country's tourism industry is under severe strain after multiple terror attacks blamed on Islamic State jihadists and Kurdish militants and the July 15 failed coup.

In the latest attack on Saturday, twin bombings ripped through Istanbul, killing 38 people, mostly police and were later claimed by the Kurdistan Freedom Falcons (TAK), seen as a radical offshoot of the outlawed Kurdistan Workers' Party (PKK).

After the release, the lira hit 3.53 against the U.S. dollar at one point after trading earlier at 3.48 as bad figures and continued chaos inside the country wreak havoc on the Turkish currency.

By 1030 GMT, the lira was at 3.52 against the greenback, which is likely to increase pressure on the central bank after it raised interest rates for the first time in three years last month.