Turkey Economic Forecast

Turkey Economic Outlook

January 8, 2019

The economy likely recorded a dismal fourth quarter, as the impact of the August 2018 currency crisis continued to reverberate. The manufacturing PMI was firmly in contractionary territory throughout the period on shrinking output and new orders, while business sentiment was decidedly pessimistic. Moreover, consumer spending was hit by higher interest rates, still-elevated inflation and depressed household sentiment, with retail sales declining sharply in October and vehicle sales plummeting throughout Q4. This comes after comprehensive data showed that GDP growth slowed sharply in Q3 on soft private consumption and fixed investment. More positively, the lira has recovered substantial ground since September, while external rebalancing continues apace, with a third consecutive monthly current account surplus in October. On the political front, President Erdogan announced a second 100-day plan in December. According to the president, it contains projects worth TRY 24 billion, which could provide a mild boost to demand going forward. Moreover, the government recently extended temporary tax cuts until the end of March, in a bid to fight inflation and support consumer spending.

Turkey Economic Growth

The economy is set to perform poorly this year, depressed by restrictive financial conditions constraining private consumption and fixed investment. However, the external sector should provide some support. Currency volatility and the possibility of renewed geopolitical tensions pose significant downside risks. FocusEconomics panelists expect the economy to flatline in 2019, down 0.2 percentage points from last month’s forecast, and 3.1% in 2020.

Turkey Economy Data

20132014201520162017
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 %)8.55.26.13.27.4
Domestic Demand (annual variation in %)10.03.25.44.47.1
Consumption (annual variation in %)7.93.05.43.76.1
Investment (annual variation in %)13.85.19.32.27.3
Industrial Production (annual variation in %)7.25.75.83.48.9
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)7.48.28.88.511.9
Inflation Rate (CPI, annual variation in %)7.58.97.77.811.1
Inflation (PPI, annual variation in %)7.06.45.79.915.5
Policy Interest Rate (%)4.508.257.508.008.00
Stock Market (annual variation in %)-13.326.4-16.38.947.6
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

ValueChangeDate
Bond Yield15.52-0.09 %Jan 16
Exchange Rate5.34-0.85 %Jan 16
Stock Market95,4111.41 %Jan 16

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