Turkey’s 2017 GDP Forecasts Raised as 1Q Growth Beats Estimates

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The Turkish economy will expand 3.5 percent in 2017, 3.1 percent in 2018 and 3.5 percent in 2019, according to a survey conducted by Bloomberg news. That compares with forecasts of 2.6 percent, 3.1 percent and 3.8 percent, respectively, in last month’s survey.

Analysis

Turkey’s economy grew 5 percent in the first quarter of 2017 as the government boosted spending on everything from wages to investments to spur the economy after a failed military coup hurt growth last year. Expansive fiscal policies boosted household consumption, which is seen growing 3.4 percent this year, up from 2.7 percent previously.

Inflation rose 11.7 percent in May after rising 11.9 percent in April and economists expect prices to rise by 10.6 percent this year and by 8 percent next year, according to the survey. That compares with forecasts of 10.3 percent and 7.9 percent in last month’s survey, respectively.

On June 15, the Turkish Central Bank left its benchmark interest rate unchanged and said it would keep a tight monetary stance until inflation eases significantly. Economists see the rate at 8 percent by the end of this year and 8.25 percent by the end of next year, according to the survey.

Key Takeaways

  • Survey of 30 economists conducted from June 23 to June 28
  • Chance of a recession happening over the next 12 months is 10 percent, according to 5 respondents
  • Q3 2017 GDP forecast at +3.8% y/y versus prior survey +3.9%
    • Q4 2017 GDP forecast at +3.3% y/y versus prior survey +3%
  • End-2017 CPI forecast at +9.4% y/y versus prior survey +9.5%
    • End-2018 CPI forecast unchanged at +8.1% y/y versus prior survey
  • Turkey 1 week repo rate seen at 8.00% by end-4Q17, current rate is 8.00%
  • See graph of GDP forecasts
    • See graph of Turkey’s recession probability

Source Comment

“We expect a smart decline for inflation, through the summer, thanks to seasonality and the base effect of last year,” said Enver Erkan, an analyst at Reek Kapital Securities in Istanbul, “Single digit inflation seems difficult to achieve for 2017 and growth will be supported through the stimulus steps taken by the government. Private consumption and both external and internal demand will be supportive, but investment side will remain the weak factor of economic growth.”

Full Survey Results

2Q 3Q 4Q 1Q 2Q 3Q 4Q Avg. Avg. Avg.
2017 2017 2017 2018 2018 2018 2018 2017 2018 2019
GDP YOY% 3.6% 3.8% 3.3% 3.8% 3.9% 4.4% 4.2% 3.5% 3.1% 3.5%
Previous survey 2.5% 3.9% 3.0% 4.1% 3.5% 4.0% n/a 2.6% 3.1% 3.8%
Private Cons. YOY% 2.6% 4.5% 3.2% 3.5% 4.0% 4.5% 4.8% 3.4% 3.2% 3.8%
Previous survey 2.2% 3.7% 3.2% 3.4% 3.3% 3.0% n/a 2.7% 3.3% 3.8%
Gross Fixed Inv. YOY% 1.8% 1.0% 0.6% 2.2% 2.4% 3.3% 1.0% 1.7% 2.5% 2.4%
Previous survey 1.0% 2.5% 2.1% 3.1% 2.8% 3.3% n/a 1.8% 2.2% 2.4%
Avg. CPI YOY% 11.5% 11.0% 9.9% 9.4% 8.5% 9.4% 8.6% 10.6% 8.0% 7.9%
Previous survey 11.3% 10.4% 9.6% 8.4% 8.2% 8.9% n/a 10.3% 7.9% 7.5%
Year-End CPI YOY% n/a n/a n/a n/a n/a n/a n/a 9.4% 8.1% 7.5%
Previous survey n/a n/a n/a n/a n/a n/a n/a 9.5% 8.1% 7.2%
Unemployment rate 11.7% 11.6% 11.6% 11.7% 11.5% 11.5% n/a 11.6% 11.3% 11.6%
Previous survey 11.8% 11.8% 11.8% 12.1% 11.8% 11.8% n/a 11.5% 11.2% 11.1%
Current Acct. % GDP n/a n/a n/a n/a n/a n/a n/a -4.4% -4.5% -4.7%
Previous survey n/a n/a n/a n/a n/a n/a n/a -4.5% -4.8% -4.9%
Budget as a % GDP n/a n/a n/a n/a n/a n/a n/a -2.5% -2.3% -2.3%
Previous survey n/a n/a n/a n/a n/a n/a n/a -2.4% -2.1% -2.2%
3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q
2017 2017 2018 2018 2018 2018 2019 2019 2019
Repo Rate 8.00% 8.00% 8.00% 8.00% 8.00% 8.25% 8.00% 8.00% 8.00%
Previous survey 8.00% 8.00% 8.00% 8.00% 8.00% 8.00% 8.00% 8.00% 8.00%
3-mo. TRLibor 12.30% 11.90% 12.00% 12.43% 12.13% 11.70% n/a n/a 11.75%
Previous survey 12.70% 11.50% 11.64% 11.80% 11.32% 12.00% 12.00% 12.00% 12.00%
2-Year Note 11.20% 11.35% 11.20% n/a n/a n/a n/a n/a n/a
Previous survey 11.53% 11.00% 10.60% 11.25% 10.75% n/a 10.93% 10.43% 9.91%
10-Year Bond 10.60% 10.80% 11.00% 11.00% 10.73% 10.18% n/a n/a 10.00%
Previous survey 11.84% 11.00% 11.45% 11.74% 11.40% 10.00% 11.18% 10.73% 10.13%

NOTE: All figures are expressed as of the end of the quarter except for GDP.
For custom economic forecast consensus: XLTP XCEF



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