Page 24 - TURKRptJun19

There are too many question marks over the data compilations being put out by the TUIK. Its official releases should only be analysed with a suspicious eye. On a year-on-year basis, TUIK’s data shows that the Turkish economy contracted by 2.6% y/y in Q1 after contracting 3% y/y in the last quarter of 2018. A Reuters poll released last week forecast a Q1 GDP contraction of 2.5%. The Q2 data possibly suggests that the period of quarterly year-on-year contractions extends to three consecutive quarters.
Surprising agricultural data. TUIK’s agricultural production data, meanwhile, has again caused surprise. The official picture shows 2.5% y/y growth in the first quarter amid booming food prices caused by collapsed production. The economic segment, however, has a limited share in overall GDP. Industrial production contracted by 4.3% y/y in Q1 after contracting by 6.4% y/y in Q4 2018 while the debt-fuelled construction industry, the one-time growth engine of the previously booming Turkish economy, shrank by 10.9% y/y after contracting 5.6% y/y in Q3 2018 and 8.7% y/y in Q4 2018. “The breakdown of the data revealed that, unsurprisingly, the expansion was driven by pre- election stimulus measures,” Tuvey of Capital Economics also said, adding: “The return to growth looks as though it will prove short-lived. The sell-off in Turkish financial markets over the past couple of months has caused financial conditions to tighten.” Capital Economics has expressed doubt that government spending will continue to rise at a rapid pace. The latest survey evidence suggests that economic activity has weakened – TUIK’s Economic Confidence Index fell to a seven-month low in May.
Private consumption shrinks 4.7%. Looking at the angle of expenditure, private consumption contracted by 4.7% y/y in Q1 after contracting by 8.9% y/y in the previous quarter while government consumption grew by 7.2% in the first quarter. Gross fixed capital formation contracted by 13% y/y in the quarter after contracting 4.7% y/y in Q3 2018 and 12.9% y/y in Q4 2018. At current prices, the private consumption share in GDP rose to 58% in Q1 from 56% in Q4 2018, but in Q1 2018 it stood as high as 60%. The government consumption share in Q1 rose to 16.5% from 16% in Q4 2018 and 14.6% in Q1 2018. Imports amounted to 31.7% of overall GDP in the quarter, up from 29.2% a quarter ago, suggesting the limited recovery in economic activity as usual fuelled imports. Also begging further scrutiny are GDP data from TUIK suggesting Turkey’s exports amounted to TRY291bn at current prices and imports amounted to TRY290bn—while TUIK’s foreign trade data shows exports amounted to $42bn in the quarter and imports stood at $49bn. One benefit of slipping further and further into authoritarianism is that the regime tends to secure a higher level of mathematics.
The European Bank for Reconstruction and Development (EBRD) on May 8 primarily cited the sharp economic deceleration in Turkey as it trimmed its growth forecast for its near-40 country region. Turkey, in recession since the fourth quarter of last year, is expected by the development bank to see its economy contract by 1% this year, with a gradual recovery then providing for 2020 growth of around 2.5%. In its last forecast for Turkey, issued in November last year, the EBRD was counting with growth of 1% in 2019. “The lira’s depreciation and high interest rates will continue to dampen consumption and investment, although net exports should make a positive contribution to growth,” the EBRD said in its commentary on Turkey’s economic prospects. It added: “Spillovers from the sharp deceleration of growth in Turkey to the economies in the EBRD regions are expected to be limited in the light of relatively modest economic linkages via trade, cross-border investment and remittances.” The lender also pointed to the global trade slowdown in its latest economic outlook for 37 countries across three continents from Morocco to Mongolia. It said it anticipated average growth in 2019 of 2.3%, shaving 0.3 percentage points from its last prediction. It would compare to the 3.4% expansion in 2018. Growth is forecast to recover in 2020 to 2.6%, the bank added, while noting that the outlook was, however, still dogged by risks such as trade tensions between the US and its major trading partners. “A widespread escalation of global protectionism remains a major concern,” the EBRD said in its report. “The modalities of Brexit are still unclear, and global
24 TURKEY Country Report June 2019 www.intellinews.com