Türkiye | No clear cooling sign in activity

Summary

Observing no clear signs of deceleration, we nowcast a quarterly GDP growth closer to 1.5% as of May. Given the current solid performance and the lagged impact of the expected tighter policies in 2H, we eliminate our previous slight downward bias and now assess the risks on our 2024 GDP growth forecast of 3.5% are balanced.

Key points

• Key points:
• Hard data on February proved that the January setback was temporary as broad-based recovery was observed in industry and services sectors.
• The leading indicators display no clear signs of a slow-down yet. According to our calculations, persistently high positive output gap indicates that the demand conditions still remain inflationary and maintain challenges to anchor inflation expectations towards the targeted levels.
• Supportive fiscal policy, elevated inflation expectations, real currency appreciation, wealth effects and availability of above inflation credit card spending underpin private consumption, for which our big data consumption indicators display only a very limited deceleration in April. Hence, aggregate demand still remains stronger than supply.
• We observe some tightening in the financial conditions, however, this tightening has not yet translated into a considerable moderation on demand conditions. We believe additional demand restrictive measures and a tight fiscal stance will be needed to ensure the expected rebalancing.
• The magnitude of the tightening in financial conditions and the fiscal policy accompanied with the potential new macro-prudential measures will determine the risks on our GDP forecasts.

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