Türkiye | Activity surprised to the downside

Industrial production (IP) once again surprised to the downside and grew 0.4% y/y in September (vs. 3% expected), implying a very sharp deceleration with 2.5% y/y in 3Q (vs. 10.7% in 2Q). We forecast 5.5% GDP growth in 2022 and 3% in 2023 with the help of potential boost before the elections.

Key points

• Key points:
• In seasonal and calendar adjusted series, IP shrank by 1.6% m/m and while the slowdown in industrial activity was more pronounced in quarterly terms with IP contracting by 4.1% in 3Q.
• The widespread deterioration was apparent in manufacturing activity (-4.1% q/q), particularly due to worsening in basic metals (-9.7% q/q) and textiles (-7.5% q/q), while both domestic demand driven and export-oriented sectors experienced contractions in their productions.
• Since the demand side of the economy -particularly consumption- will likely remain much stronger supported by the continuing employment gains, the need of renewing inventories and the additional pressure on the exchange rate will keep inflationary risks alive.
• Our monthly GDP indicator nowcasts an annual GDP growth of 3.9%, which can decelerate further to 3.2% in October. Our weekly GDP tracker also confirms a similar trend with near 4% y/y GDP growth rate by the end of October.
• Possible ease in credit conditions along with new credit packages and other potential populist measures on top of loose monetary policy ahead of the elections could lead GDP to grow by 5.5% in 2022 and 3% in 2023 despite the expected adjustment in economic policies in 2023H2.

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