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Turkey surprised once again!

GDP growth figure for Q4 2017 just released at 7.3%yoy much higher than expected by the consensus (6.7%).

  • The growth rate for 2017 is then brought to 7.4%yoy, significantly above our forecast (6.5%) and consensus expectations of 6.3%.
  • Domestic demand was the main driver of Q4 growth. Household spending rose at 6.6%yoy but has decelerated compared to Q3 (11%) while government spending accelerated from 6.7%yoy to 7.4%yoy.
  • Investment grew by 6%yoy down from 13.2%yoy in Q3. It is worth noting that Q3 figures were extremely elevated due to working day adjustments and base effect following the aborted coup.
  • Trade has a negative contribution (-3.1%) to GDP growth as exports continued to decelerate and imports growth accelerated. Current account deficit widened to 7% of GDP.

The carry-over is now 3.9% for 2018.

Despite a pro-growth bias of the Government(the Prime Minister announced incentives to investment projects amounting 4% of 2017 GDP),that could lead to upside risks, we maintain our forecast at 4.3%yoy for 2018.

A higher pace of growth would increase both domestic (huge inflation) and external (further deterioration of current account deficit) imbalances that would pose risks for the economy.

HERVE Karine , Emerging Markets Senior Economist
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Turkey surprised once again!
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