Türkiye | A mild recession as of 3Q24

Summary

Turkish economy experienced a mild recession, in line with our expectations, contracting by 0.2% q/q in 3Q24 (vs. -0.2% q/q in 2Q24) and posting 2.1 y/y growth. Our monthly GDP indicator nowcasts point to a weak quarterly GDP growth for 4Q24, which could result nearly 3% y/y in 2024.

Key points

• Key points:
• While industry contributed negatively to quarterly GDP growth, more limited negative contribution from services, along with positive contributions from construction and agricultural sectors, prevented a deeper downturn.
• Private consumption contracted only modestly, contrary to our expectations of a deeper decline, while investment and net exports grew on a quarterly basis, supporting aggregate demand. On the other hand, the composition of demand components turning into in favor of net exports is crucial.
• The imbalance between demand and supply still remained elevated, continuing to lead the inventories to fall.
• Leading indicators suggest that there could be a slight recovery in GDP on a quarterly basis in 4Q24, even if it remains weak. GDP growth could highly likely materialize around 3% in 2024.
• On the external side, potential protectionist policies and geopolitical risks could pose downside risks to growth next year. On the domestic side, the easing cycle of the monetary policy could provide support, while fiscal policy can be calibrated to not only support the fight against inflation but also to minimize the impact of the external downside risks. Under these expectations, we have slightly revised our 2025 GDP growth forecast from 2.7% to 2.5%.

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