Recession over -- for now
Broadly in line with expectations, the Turkish economy contracted by 2.6% annually, but expanded by some 1.3% sequentially in the first quarter. While the latter figure is somewhat stronger than our expectation, this is a technicality of sorts that stems from the difficulty of replicating Turkstat’s working-day and seasonally-adjusted data perfectly, and does not change the big picture – that of a visible sequential pick-up over the previous quarter, together with a base effect-driven drop over the same quarter of previous year.
The pick-up in Q1, as it is well-recognized by now, is driven by stimulus -- namely a sharp surge in state bank lending and fiscal expansion – which is likely to reverse in the coming months, once the effect of the stimulus inevitably wanes, and the room for new measures remains rather limited. Put differently, while the recession has perhaps ended on “technical grounds” after two consecutive quarters of contraction in Q4 and Q3 of last year (q/q), growth is likely to remain in the doldrums in the near-term, possibly slipping into negative territory again in H2.
Now read on...
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