Page 43 - TURKRptMay19

contract in 2019. Turkey’s economy contracted 3% in the last quarter of 2018. Economic activity has been slow since with the central bank's policy rate standing at 24% since September.
The seasonally and calendar-adjusted index was in positive territory for the second consecutive month. It was up 1.3% m/m after a month ago registering growth, of 1% m/m, for the first time since July.
Citing Turkey’s latest economic readings, Albayrak told reporters on April 16 that Turkey had probably broken free of its first recession in a decade. However, analyst Timothy Ash at BlueBay Asset Management responded in a note to investors that such speculation was “a bit early” and—pointing to the unresolved S-400 row between Washington and Ankara—he added that “all this could be in vain if there is another big fall-out with the US on the S-400 front”.
In taking heart from the latest industrial output figures, officials are also overlooking the unsustainable loan growth financed by public lenders under government pressure along with booming fiscal expenditures , two moves that were put in place prior to the March 31 local elections, which nevertheless went so terribly wrong for the Erdogan administration with the defeats in Ankara and Istanbul.
“It looks like March’s industrial data will show a further improvement. The rise in the manufacturing PMI in recent months [standing at 47.2 in March] is consistent with the year-on-year pace of contraction in industrial production easing further. Taking today’s figures together with retail data showing rising sales, it looks like the economy pulled out of recession in Q1,” William Jackson of Capital Economics said in a research note entitled “Economy past the worst”.
“It looks like the economy may have expanded by around 0.5-0.8% q/q. That said, the recovery is likely to be slow from here on. Activity in Q1 was probably boosted by pre-election stimulus, which is likely to fade. And financial conditions tightened towards the end of last month,” Jackson added.
The sub-components of the industrial production index for March portrayed the continuation of a broad-based deterioration in y/y terms as out of 24 manufacturing subsectors, 17 sectors registered y/y declines, Ozlem Bayraktar Goksen of Tacirler Invest said in a research note. She added that the foreign trade figures implied a prevailing weakness though at a slower pace in March.
Tacirler said it perceived that the course of Q1 pointed to another y/y contraction in GDP. However, in sequential terms, following the GDP declines in the final two quarters of last year, Tacirler expected a rise in Q1. “Yet, the pace and the sustainability of the recovery are of the utmost importance. The loan growth indicators have been showing that a rise prevails, which depicts the continuation of the improvement in April, so far.”
43 TURKEY Country Report May 2019 www.intellinews.com