Turkey | Still strong activity at the start of 4Q

Summary

Industrial Production (IP, cal. adj.) grew by 10.2% yoy in October, confirming the continuation of strong growth at the start of 4Q. 2020 GDP growth will likely get close to 1%. We still expect 2021 GDP growth to materialize near 5% backed by the expected decline in risk premium and favorable base effects.

Key points

• Key points:
• Seasonal and calendar adjusted IP increased by 1.1% mom in October and maintained an ongoing recovery since May despite the deceleration in momentum.
• On the sectorial side, the recovery was not broad-based as the uneven rise in manufacturing sector (1.4% mom), especially on the back of motor vehicles, electrical equipment, pharmacy, and textile production, underpinned IP (export-oriented sectors remained relatively strong), while electricity and mining production contracted by 2.6% and -0.6% mom, respectively.
• Our Big Data proxies and other high frequency indicators remained strong till the third week of November, but started to reverse thereafter especially when the new round of confinement measures have been introduced. Our monthly GDP indicator nowcasts a yearly GDP growth rate of near 7% as of November with 52% information, which has been followed by a rapid deceleration of 3.3% growth in December (33% information).
• All in all, although the strong recovery momentum in 3Q seemed to die out faster than expected, 2020 GDP growth will likely get close to 1%, above our current forecast of 0%.
• We still expect 2021 GDP growth to materialize near 5% since 2021 could still be a rebalancing year backed by the expected decline in risk premium and favorable base effects

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