Page 23 - TURKRptJun19

3.1 Macroeconomic overview
ANALYSIS: Turkey technically exits recession but analysts fear double- dip's ahead. Turkey’s seasonally and calendar-adjusted GDP grew by 1.3% q/q in Q1 following the contractions seen in the previous three quarters, statistical institute TUIK said on May 31. On a quarter-on-quarter basis, two consecutive quarters of contraction equates to a technical recession. The Q1 data suggest Turkey exited from its technical recession—but the initial indicators are not promising for Q2. Even if the assessment is that pre-election stimuli—arranged in advance of the June 23 Istanbul revote—and foreign tourist flows will support economic activity in the second quarter, there is as yet no real light at the end of Turkey’s tunnel of economic woe. “This bounce doesn't reflect an underlying recovery, but a big credit expansion in Q1 that in March alone pumped 1.5% GDP in new loans into the economy. And of course that credit expansion destabilized the BoP and weakened the Lira,” Robin Brooks of the Institute of International Finance (IIF) observed on Twitter.
“Turkey’s economy returned to growth in Q1 but the tightening of financial conditions over the past couple of months has probably resulted in a renewed downturn,” Jason Tuvey of Capital Economics said in a research note. The latest picture reinforced Capital’s view that the recovery will be slow and bumpy. It remains comfortable with its below-consensus forecast for GDP to contract by 1.8% over the course of 2019.
Key revision. A notable key aspect of the released data is that it relates how TUIK revised its Q2 2018 GDP calculation down to a contraction of 0.1% q/q from the 0.05% q/q growth shown by its previous GDP release in March. As a result, the revised data confirms that Turkey was in a technical recession throughout the second half of last year—as bneIntellinews repeatedly reported.
23 TURKEY Country Report June 2019 www.intellinews.com