GDP Growth – TUR

Growth Rates are revealed for Turkish economy (2019 Q3)

The year 2018 was a downward path for most of the economies and the picture for Turkey was not different. After the leading central banks decided to cut rates and opted a quantitative easing we have witnessed a pick up on global demand during the course of this year. Together with the trade deal optimism supply side was also in recovery.

According to expenditure based gross domestic production (GDP) data, which was released by the Turkish Statistical Institute (TUIK), Turkish economy has recorded a 0,9% growth at the third quarter of this year compared to the last year’s same period. It is a good news after spending all the previous three quarters in negative zone due to contraction in the economy.

Graph 1

In the graph above, GDP growth by expenditure is depicted with turquoise columns and it shows a gradual increase since the first quarter of 2019. In order to catch the announced growth rate target of 0,5% by the end of 2019, it is now required to hit a 4,5% growth in the last quarter, which is also possible thanks to improved conditions and the base effect from the last year’s record low closure.     

Speaking of improved conditions, we can have a closer look into “economic activities” from the production perspective for a better understanding. Except Finance, there is a discernible pick up almost in all main sectors.  Although finance sector growth in q3 with a clear 2,0% is considered to be good, it is far below q2’s 5,3%. The most improved activity in this quarter is Construction, but it is still in the -7,8%. Industry follows it with a 1,6% and it is a very satisfying performance compared to last quarter’s -2,6%. Agriculture contributes with a 3,8%, but it is also below last quarter’s 4,2%. Lastly, Services turned this quarter to a plus with a 0,6%. Including but not limited to these data then quarterly GDP for 2019 in Turkey reaches to 0,9% from the previous -1,6%.

Graph 2

When it comes to expenditure perspective, the situation is so:

Although it is widely pronounced by chief economist, including the new president of European Central Bank – Christine Lagarde, it was Turkey to go ahead first with fiscal expansion to support monetary policy. In expense of distorting strong budgetary discipline, growth is bolstered with public expenditures. Strong household demand has also made a solid contribution to the growth. From the data we can conclude that, despite low interest rates and incentives, entrepreneurs are still not so reluctant for new investment undertakings and current account balance are heading slowly to a deficit.

Last but not least, I have also plotted the quarterly “seasonally and calendar adjusted” data for the same period on the Graph 1 with a blue line. Being smoother with the adjustments, GDP growth rate follows a different pattern. Although expenditure based GDP increases gradually from the beginning of the year, adjusted data shows a sudden jump in 2019/q1 from -2,6% to 1,7% and then falls from there for every quarter.

It must be also noted that there is a minor revision in data by TUIK and those are adapted to above graphs, so please consider that when you are comparing this data with the previous articles (Growth in 2019/Q2).  

Ergun UNUTMAZ, 03.12.2019

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