Turkey | Activity still displays a strong momentum

Summary

Industrial Production (IP) grew by 8.1% yoy in calendar adjusted terms (+11.2% yoy in unadjusted series) in September, resulting in an increase of 8% in 3Q after the sharp contraction of 17% in 2Q. Given the strong 3Q and October-November high frequency data, 2020 GDP growth rate will be above our current forecast of 0%.

Key points

• Key points:
• The strong rise in IP was supported by all main sub-sectors in 3Q, where intermediate goods production took the lead and was followed by capital goods production.
• Most of the sectors kept recovering but the manufacturing sector gave the highest contribution of 6.8pp in 3Q IP growth, confirming an acceleration of domestic demand in addition to still supportive export-oriented sectors.
• Our monthly GDP indicator nowcasts a yearly GDP growth rate of near 7% for 3Q as of September with almost full information, which has still been followed by a high momentum at the start of 4Q.
• 2020 GDP growth rate will likely above our current forecast of 0%, which could provide room for an explicit rate hike of the Central Bank (CBRT) next week as the markets already priced in.
• We maintain our 2021 GDP growth estimate at 5.5% with some downside risks due to monetary tightening which could be balanced with lower risk premium.

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