Turkish economic weakness exposed in post-referendum data

ISTANBUL (Reuters) - Turkish unemployment hit a seven-year peak in early 2017 while the budget deficit rose, data showed on Monday, underlining the economic challenges facing the country a day after its social divisions were laid bare in a referendum.

Turks narrowly voted on Sunday in favor of constitutional changes granting sweeping powers to President Tayyip Erdogan. He has cast the reforms as necessary in part to boost the country’s economic development.

Hours after the referendum result, Statistics Institute figures showed the unemployment rate reached 13 percent in the three months to February, from 12.7 percent in the three months to January and 11.1 percent a year earlier.

“Syrian refugees, higher number of bankruptcies, slower economy, public sector lay-offs...and stress on the tourism sector showed its impact on the figures,” said BGC Partners chief economist Ozgur Altug.

The non-farm jobless rate rose to 15.3 percent during from 13.0 percent a year earlier, while youth unemployment surged to 24.5 percent from 19.2 percent.

Altug said the labor market “bleeding” might stop once a government employment campaign, providing 12 billion lira in support and expected to create 1 million new jobs, gained traction. The initiative was launched in early February.

Separate data showed the budget deficit jumped to 19.5 billion lira ($5.3 billion) in March, creating a first quarter gap of 14.9 billion lira.

That reflected temporary measures taken to boost economic activity, such as tax cuts, Finance Minister Naci Agbal said in a written statement.

“As the temporary cuts are gradually done away with, there will be a return to a positive performance in the budget balance,” he said, adding that the government remained to determine to maintain budget discipline.

“On one side we will support growth and on the other side we will determinedly maintain fiscal discipline with reforms and new steps,” he added.

Turkey’s economy shrank 1.3 percent in the third quarter after an attempted coup last July, but bounced back in the final quarter to grow 2.9 percent in 2016 as a whole.

Reporting by Orhan Coskun; Writing by Daren Butler; editing by Dominic Evans and John Stonestreet