Türkiye | 2Q24 GDP shows a clearer rebalancing

Turkish economy grew by 0.1% q/q and 2.5% y/y in 2Q24. Significant revisions in both 2023 and 1Q24 resulted in a moderation of the quarterly growth path with 0.1% growth in 2Q24 after 1.4% in 1Q24 (vs. 2.4% before revision) in contrast with our previous mild contraction expectation.

Key points

• Key points:
• There were notable revisions in both 2023 and 1Q24: Accordingly, 2023 annual GDP growth was revised from 4.5% to 5.1%, driven largely by upward revisions in the private consumption (+0.9 pp) and downward revisions in public consumption (-2.8pp). On the other hand, 1Q24 GDP growth was revised downward from 5.7% y/y to 5.3% y/y, on the back of downward revisions in private consumption (-0.5pp) and investment (-1.0pp) and upward revisions in public consumption (1.6pp).
• 2Q24 GDP realizations pointed to a negative quarterly contribution from domestic demand excluding inventories on the back of lackluster growth in private consumption and considerable worsening in investment.
• Considering the contributions to the annual growth, the support from domestic demand declined significantly (1.2 pp vs. 3.7pp prev.), while the support from external demand slightly moderated (1.3pp vs. 1.6pp prev.). The positive gap between aggregate demand and supply has almost closed, leading to a mild negative contribution from inventories (-0.2pp in 2Q24 vs. -4.4pp previously in annual GDP). On the sectorial side, broad-based services excluding taxes (1.3pp) was the main contributor to annual growth, while industry (-0.4pp) particularly manufacturing (-0.5pp) pinned down the growth.
• Our monthly GDP indicator nowcasts an annual growth rate of 2.6% in July and 2.4% in August, which overall points to a quarterly GDP contraction of nearly 0.4% q/q as of August.
• Considering the revised GDP path and continuing tighter financial conditions, we evaluate risks slightly to the downside for our 2024 GDP forecast of 3.5%. New Medium Term Plan (MTP) to be released later this week will be key to see the Government growth targets on the pace of adjustment.

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