As political worries weigh, Turkish unemployment rises

By David Dolan ISTANBUL (Reuters) - Turkish unemployment topped 10 percent in February-April, data showed on Monday, ticking higher from a year earlier and highlighting the weak state of an economy now hamstrung by political uncertainty. President Tayyip Erdogan and the ruling AK Party he founded had been counting on a surge in domestic and overseas investment after the June 7 parliamentary election. But the AKP's failure to win a majority has ended up increasing investor uncertainty. Prime Minister Ahmet Davutoglu has said the AKP will exhaust all options to form a government before it will consider an early election. Yet it needs a junior partner to form a majority coalition and on Monday the head of the main opposition said the opposition parties should instead come together and form a government. "Turkey is facing the worst of both worlds right now: a sharp economic downturn and significant post-election uncertainty with regards to both the formation and durability of the new government, as well as the policy regime," said Nicholas Spiro, managing director of Spiro Sovereign Strategy. Unemployment averaged 10.6 percent in the three months to April, data from the Turkish Statistics Institute showed, up from 9.7 percent a year earlier. However, the data marked an improvement from the January-March period, when unemployment stood at 11.2 percent. "Though we see some little recovery in economic activity by Q2, it is unlikely that we will see a considerable drop in the unemployment rate in the next couple of months due to meager economic growth and lagged transmission of GDP growth over employment," Deniz Invest said in a note to clients. Industrial companies shed 43,000 jobs during the period, Deniz Invest said, adding that did not "inspire confidence in economic recovery". JITTERY MARKETS Despite low growth, the central government budget is on course to "comfortably" achieve targets, Finance Minister Mehmet Simsek said on Monday, after separate data showed a budget surplus of 1.64 billion lira in May. Markets weakened on the concerns about political uncertainty, with the lira down nearly 1 percent against the dollar and the BIST 100 stock index giving up 1.5 percent. Turkey has enjoyed years of breathtaking growth under the AKP. In 2002, per capita GDP averaged $3,600, just ahead of Equatorial Guinea. By 2013 it had trebled to $11,000, higher than Malaysia. With annual output of more than $800 billion, Turkey is now comfortably among the world's top-20 economies. But growth has stalled, slipping to 2.9 percent last year from more than 4 percent in 2013. Critics say Turkey relies too much on construction, private consumption and debt, and desperately needs to boost household savings. (Editing by Daren Butler/Hugh Lawson)

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