Q3 GDP and October BOP

TURKEY - Report 11 Dec 2017 by Murat Ucer and Atilla Yesilada

Here are some quick reactions on today’s two important data releases, which we shall follow up in the coming days and reports, with more analysis/thoughts.

GDP growth surprised on the upside in Q3, coming in at a whopping (unadjusted) 11.1%, y/y and 9.6% (working day-adjusted), higher than the market consensus (which was around high single-digits), but in line with the official/ministerial pronouncements made earlier.

In terms of the demand composition, GDP growth appears driven entirely by domestic demand, with contributions from net exports and stock changes almost nil (Graph 1). The former was broadly expected with imports having caught up with -- in fact, having exceeded according to trade volume data -- exports, but the latter (the behavior of stocks) was a bit of a surprise to us, though we still think stock build-up may feature as an important growth driver in the final quarter of the year. (Recall that because of the chain-weighted methodology, contributions do not add up to totals, and are illustrative only.) The rebound in machinery and equipment investment, which grew by 15.3%, y/y, was the (only) good news in terms of demand composition of growth, though having come from a suppressed base and given the ongoing weakening in the broader investment environment, we think it is unlikely to prove sustainable.

Now read on...

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