Türkiye | Activity led by prevailing strong demand

Summary

Industrial production (IP) decreased by 0.2% y/y in cal. adj. series while unadjusted figure increased by 11.3% in May. We forecast GDP growth to be 4.5% in 2023, led by expected gradual normalization steps in monetary policy, whereas the growth in 2024 will depend on the stance of policies against inflation.

Key points

• Key points:
• In seasonal and calendar adjusted series, monthly IP slightly recovered by 1.1% in May and reached limitedly above its March figure, eliminating the negative impact from April.
• Leading indicators signal that economic activity remained robust in 2Q, also supported by our monthly GDP indicator, nowcasting 4.4% growth in June (with 27% of info.) and 6.5% in July (particularly boosted by positive calendar day impact).
• The composition of aggregate demand in favor of domestic demand maintain upside pressure on currency, inflation and current account deficit.
• Signals from economic management to achieve soft landing point to weak but positive quarterly growth rates in the near future, which will lead domestic demand to remain strong if other macro prudential policies would not be introduced.
• Considering gradual normalization in monetary policy of top of solid first half growth, we expect 2023 GDP growth to be 4.5%. We maintain our view that the adjustment in activity might be more clearly observed after the local election and GDP growth might decelerate to 2% in 2024.

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