Page 11 - TURKRptOct19

But even should a new shock arrive, the government could announce an economic expansion as early as Q3 since its data is not questioned— apart from fleetingly by the opposition in parliament and, to officials' consternation, rather rudely by Germany's Commerzbank in September 2017—despite being marred by significant inconsistencies.
The TUIK’s better-than-expected GDP data for Q2 was eagerly presented as pointing to the green shoots of an economic recovery, but digging into the numbers suggested the investment collapse in Turkey continued during the quarter, even from the official perspective.
Agricultural ‘surprise’. For a surprise which to the seasoned observer is really no surprise at all, take a look at TUIK’s agricultural production data (which has been ‘surprising’ for several quarters in a row). The official picture shows growth of 3.4% y/y, with the previously released 2.5% y/y growth given for the first quarter revised down to 1.3%.
Moving over to the smokestacks, industrial production contracted for a third consecutive quarter while the debt-fuelled construction industry, once hailed as the relentless growth engine of the boomeriffic Turkish economy, shrank 13% y/y on top of the shrinkage endured in the previous three quarters.
Private consumption shrinking. Looking at the angle of expenditure, the official data suggested a slowdown in the private consumption contraction recorded for three straight quarters, with a slowing also seen in government consumption growth in the second quarter.
“The breakdown of the data showed that economic growth was heavily reliant on stronger consumer spending and ongoing fiscal stimulus,” Jason Tuvey of Capital Economics said in a research note.
With Turkey, analysts are one minute painting pinkish hues and the next dipping their brush in deep, dark watercolours, but Jon Harrison of TS Lombard told Reuters in response to the GDP release that the data “confirms that growth is not doing very well and although it is moderately better than expected ... concerns are still there about whether there will be an overshoot of monetary policy, and a renewed depreciation in the currency”.
The Erdogan administration will tell you it’s not really a big believer in zombies, though in Turkey’s tormented economy there are living dead companies all around. Such studious denial allows officials to pile on more of their trademark economy policy, namely stimulating the economy by turning on the credit taps, but such is the wretchedness out there by now that private lenders are dragging their feet over extending new loans and domestic confidence in the government is pretty much at rock bottom.
“Turkey in Q3 saw a big credit expansion, led by state banks giving Lira- denominated loans (LHS). Factoring in shrinking FX lending, this expansion is half as big as in Q1, with a large, positive credit impulse to growth (RHS). In short, Turkey's growth remains a credit story...,” Robin Brooks of the Institute of International Finance (IIF) said on October 6 in a tweet.
11 TURKEY Country Report October 2019 www.intellinews.com