By Nihad Ahmed

Turkey's economy grew 7.4% on year in the third quarter, the Turkish statistics office Turkstat said Tuesday, but a sharp slide in the lira on persistently high inflation concerns has now put the country into a currency crisis.

Growth in the quarter was supported by private consumption, up 9.1% on year, Turkstat data showed, propelled by the lifting of most Covid-19 restrictions in July. Government consumption rose 9.6%, while gross fixed capital formation fell 2.4%.

Net exports also drove growth, underpinned by a strong export performance. Exports of goods and service were up 25.6%, with external demand driving increased tourist inflows and shipments of goods, while imports fell 8.3%.

The statistics office revised second-quarter gross domestic product growth up to 22.0% from 21.7%. The economy grew at a record pace in the quarter on the back of a rebound in activity and large base effects, and was the only other G-20 member aside from China to log growth in 2020, shored up by cheap credit.

The loosening of monetary conditions at the behest of President Recep Tayyip Erdogan has paved the way for runaway inflation and thrown the lira into a frenzy, eroding households' purchasing power and making vital imports, including energy and raw materials, much more expensive.

Mr. Erdogan has pressured the central bank to cut interest rates despite rising inflation, which reached almost 20% in October. His defense of further rate cuts last week dashed hopes for a change in course, sending the lira to a historic low.

A vicious cycle of sky-high inflation, further falls in the lira and increased dollarization could severely damp future growth, economists say.

Write to Nihad Ahmed at nihad.ahmed@wsj.com

(END) Dow Jones Newswires

November 30, 2021 02:40 ET (07:40 GMT)