Turkey | Stronger than expected 1Q activity data

Industrial Production grew by 16.6% yoy in cal. adj. terms in March, implying 19.9% yoy growth in unadjusted series (11.2% 1Q21 vs. 10.2% in 4Q20). The strong momentum so far, favorable base effects and upward revisions in the global growth outlook reinforces upsides risks on our current 2021 GDP growth forecast of 5%.

Key points

• Key points:
• In sectorial detail, exporting sectors continued to mainly back the recovery, whereas domestic demand oriented sectors remained solid.
• IP also indicated somewhat loss of momentum by growing 2.6% qoq (vs. 4.7% in 4Q20), which would deepen further as our IP forecast confirms this trend for April on top of leading indicators.
• Annual figures will remain high with supportive base effects till June, in which we may observe some correction due to the reversal of base effects. Our monthly GDP indicator nowcasts a yearly GDP growth of 6.5% in 1Q21 (implying 1.5-2% qoq) and 23% as of May.
• Tighter financial conditions, stricter lock-down measures, moderately growing credits, finalization of the temporary ban on lay-offs by the end of June, all raise the uncertainty on the near term growth outlook.
• We remain prudent for now keeping our 5% GDP growth forecast but will reevaluate risks once we have more information about 2Q.

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