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Turkey GDP Q4 2023

Turkey: Economy improves in the final quarter of 2023

GDP growth improved to 1.0% on a seasonally adjusted quarter-on-quarter basis in Q4 from 0.3% in the third quarter. The reading surprised markets on the upside and was mainly driven by stronger private consumption. On an annual basis, economic growth slowed notably to 4.0% in Q4 from 6.1% in the previous period. Looking at 2023 as a whole, the economy grew 4.5%, down from 5.5% in 2022 and below the 10-year average of 5.3%.

Household spending growth rebounded, growing 3.6% on a seasonally adjusted quarter-on-quarter basis in Q4 compared to a 1.7% contraction in Q3. The improvement was largely due to strong resilience among Turkish consumers to the rising cost of living; average inflation in the quarter rose to its highest level in a year, while financing conditions were markedly tighter than in Q3. Government spending, meanwhile, dropped at the sharpest pace since Q3 2022, contracting 4.3% (Q3: +2.6% s.a. qoq). Meanwhile, fixed investment contracted 0.8% in Q4, marking the worst reading since Q3 2022 (Q3: +4.9% s.a. qoq), likely dented by the Central Bank’s sharp monetary tightening.

On the external front, exports of goods and services contracted 2.5% in Q4, marking the worst result since Q4 2022 (Q3: +5.2% s.a. qoq). Meanwhile, imports of goods and services deteriorated, contracting 3.9% in Q4 (Q3: +1.6% s.a. qoq).

Business and consumer survey data for January and February suggests that the economy started the year on a solid footing, with the government’s commitment to orthodox economic policies likely shoring up investor sentiment. Nonetheless, sequential growth is forecast to remain subdued until Q4, the point at which the Central Bank is set to begin cutting interest rates amid softer price pressures. The escalation of regional geopolitical tensions poses a downside risk.

Muhammet Mercan, chief economist at ING, commented on the outlook:

“We see GDP growth this year at 2.5%. The risks are, however, on the upside given the Medium Term Plan (MTP) forecast of 4% from the government and the continuing supportive fiscal stance in addition to a potential recovery in foreign capital inflow.”

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