Turkey | Growth slowing but keeping a solid pace

Summary

Turkish economy grew by 7.3% y/y in 1Q22 parallel to market expectation (7.2%). Given recent high momentum in activity and clear commitment of authorities to maintain loose policies, risks become tilted significantly to the upside on our prudent 2022 GDP growth forecast of 2.5%.

Key points

• Key points:
• Strong private consumption and exports remained to be the main drivers on the yearly growth rate whereas contribution from investment was limited.
• Main contributors were services and industry since the contribution of services in general terms increased further to 6.1pp, mainly backed by trade, transportation and accommodation (3.3pp) and financial activities (1.2pp), which was followed by industry (1.6pp).
• On the expenditure side, our demand subcomponents signal that investment remains sluggish in 2Q22 after a very slight pick-up in the previous quarter, while private consumption stays much stronger.
• Leading indicators such as our high-frequency proxies, electricity production, confidence indices and manufacturing capacity utilization still signal solid activity in 2Q22 as our monthly GDP indicator nowcasts an annual GDP growth rate of 6.8% (37% of info) in May.
• The share of wages in gross value added (GVA) continued to decline significantly to 27% in the seasonal adjusted series, the lowest level since 2001 financial crisis, while income transfer in favor of the corporate sector becomes much clearer since 3Q20.

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