Turkey: Growth moderates in 2Q – ING

Turkey’s economic activity was broadly in line with expectations in 2Q with 5.2% year-on-year growth compared to market expectations- as per the Reuters Survey- of 5.3% (and ING’s call of 5.4%), points out Muhammet Mercan, Chief Economist at ING.

Key Quotes

“The figure shows some moderation from the previous quarter's 7.3% YoY growth (given the fading credit impulse and early signs of moderation in domestic demand).”

“Accordingly, four-quarter trailing GDP growth retreated slightly to 7.8% over the previous quarter, though growth will likely drop significantly in the second half, as evidenced by the ongoing momentum loss in activity.”

“In seasonal and calendar adjusted terms (SA), GDP expanded 0.9% quarter-on-quarter, decelerating from 1.5% QoQ a quarter ago, showing that activity has already started to ease and will likely turn negative in the coming quarters. TurkStat revised its quarterly figures for 1Q18 to 7.3% from 7.4%.”

“Exports maintained their uptrend, with a 4.5% increase amid sharp currency weakness and continuing external demand from the EU. Imports moderated to a mere 0.3%, the lowest since 2014 on the back of weaker domestic demand. Accordingly, the contribution of net trade turned positive again by 1.0 percentage point.”

“Overall, strong growth in the first half of this year is attributable to fiscal measures introduced by the government to support private consumption and investment, with increasing capital spending.”