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Turkey GDP Q4 2019

Turkey: Economic growth reaches near two-year high in Q4

The Turkish economy ended last year on a notably stronger footing, with GDP growing 6.0% year-on-year in the fourth quarter of last year, a seven-quarter high and markedly above both the prior quarter’s 1.0% annual expansion, as well as market expectations of 5.0% growth. Resurgent domestic demand led the acceleration, while the external sector weighed on the overall economy. Looking at 2019 as a whole, economic growth decelerated to 0.9%, a one-decade low, after growing 2.8% in 2018. Meanwhile, on a calendar- and seasonally-adjusted basis, economic growth accelerated from 0.4% quarter-on-quarter in Q3 to 1.9% in Q4, marking a two-year high.

A detailed breakdown of the headline figure showed that domestic demand strengthened notably in the final stages of last year. This was chiefly due to surging private consumption, which grew 6.8% year-on-year (Q3: +1.9% year-on-year); households benefited from a reduction in the unemployment and inflation rates, although both remained elevated nonetheless. Moreover, growth in consumer credit jumped amid the government’s reinforced focus on achieving high growth rates and the Central Bank’s continued monetary policy easing. Yet despite the authority’s vigor to return to high growth rates, government consumption growth eased from 5.7% in the third quarter to 2.7% in the fourth. Meanwhile, fixed investment contracted again, although at a much softer rate (Q4: -0.6%; Q3: -12.6%) as credit has become markedly cheaper in light of monetary policy developments.

Turning to the external sector, net exports dragged on the economy as import growth soared on strengthening domestic demand. Imports of goods and services grew 29.3% year-on-year in the fourth quarter (Q3: +7.9% yoy), an over 16-year high, with a supportive base effect playing its part. Exports, meanwhile, lost step and increased 4.4% over the same period a year prior, down from the third quarter’s 5.1% annual increase.

Looking ahead, the Turkish economy is expected to bounce back from last year’s poor showing, although this is largely due to a supportive base effect. Domestic demand is seen recovering on the back of household consumption and fixed investment rising from the ashes, aided by looser monetary policy and a credit impulse. However, the balance of risks remains skewed to the downside amid the government’s focus on achieving high growth through cheap credit, while geopolitical tensions and market volatility further cloud the outlook.

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