Turkey Economic Forecast

Turkey Economic Outlook

March 5, 2019

Incoming data for Q1 remains weak. Consumer sentiment fell again in February on a pessimistic outlook on the economy. Coupled with the softest growth in consumer credit in over 16 years in January, this bodes ill for household consumption in Q1. Moreover, business confidence stayed pessimistic and the manufacturing PMI remained entrenched in contractionary territory in February. This follows a likely weak outturn in Q4 2018. Private consumption suffered from high inflation and interest rates, as highlighted by the steepest retail sales contraction in December since current records began. Moreover, in the same month, the current account balance registered the first deficit in five months on lower goods exports. Against this backdrop, parliament recently granted President Erdogan emergency powers over the economy, in a move that raises governance risks given the higher concentration of power.

Turkey Economic Growth

The economy seems set to remain fragile this year as restrictive financial conditions dent domestic demand. Nevertheless, a likely recovery in H2 should give the Central Bank room to spur domestic demand, while the external sector should provide further support. Risks relating to currency volatility and a possible renewal of geopolitical tensions cloud the outlook. FocusEconomics Consensus Forecast panelists expect the economy to shrink 0.3% in 2019, which is down 0.1 percentage points from last month’s forecast, and to expand 3.0% in 2020.

Turkey Economy Data

Population (million)76.777.778.779.880.8
GDP per capita (USD)12,38612,02610,89810,80510,536
GDP (USD bn)950934858862851
Economic Growth (GDP, annual variation in %)
Domestic Demand (annual variation in %)
Consumption (annual variation in %)
Investment (annual variation in %)
Industrial Production (annual variation in %)
Unemployment Rate9.110.010.310.910.9
Fiscal Balance (% of GDP)-1.0-1.1-1.0-1.1-1.5
Public Debt (% of GDP)31.328.627.528.328.3
Money (annual variation in %)21.511.917.417.615.5
Inflation Rate (CPI, annual variation in %, eop)
Inflation Rate (CPI, annual variation in %)
Inflation (PPI, annual variation in %)-  -  -  -  -  
Policy Interest Rate (%)4.508.257.508.008.00
Stock Market (annual variation in %)-  -  -  -  -  
Exchange Rate (vs USD)2.152.332.923.533.79
Exchange Rate (vs USD, aop)1.912.192.733.023.65
Current Account (% of GDP)-6.7-4.7-3.7-3.8-5.6
Current Account Balance (USD bn)-63.6-43.6-32.1-33.1-47.4
Trade Balance (USD billion)-79.9-63.6-48.1-40.9-58.9
Exports (USD billion)162169152150166
Imports (USD billion)242233200191225
Exports (annual variation in %)-0.14.4-10.0-1.210.7
Imports (annual variation in %)6.3-3.8-13.9-4.517.8
International Reserves (USD)11110792.992.184.2
External Debt (% of GDP)41.343.346.647.353.2

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Turkey Facts

Bond Yield15.49-0.09 %Mar 20
Exchange Rate5.42-0.85 %Mar 20
Stock Market103,3101.41 %Mar 20

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