Türkiye | Pending an effective rebalancing in activity

Summary

The economic activity decelerates further especially driven by the weakening in industry. Aggregate demand remains stronger than supply, keeping inflationary pressures alive. Risks would be on the upside for our 2024 GDP forecast of 3.5%, considering the strong performance in 1H24 and continuing supportive fiscal stance.

Key points

• Key points:
• Industrial production fell by 3.4% in April-May in comparison with 1Q24, while services sector prevented a further deceleration in activity in 2Q24 as services production fell only by 0.5% q/q.
• Turnover indices pointed out a contraction in industry, construction and trade sectors in April-May but exhibited only a slow-down in services sector. Leading indicators signal a further deceleration in activity as of early July.
• The quarterly moderation in aggregate demand in 2Q24 has been supported by a contraction in investment expenditures and net exports; while private consumption supported positively.
• If an effective policy mix lacks in fight against inflation, the CBRT could remain restrictive longer than we expect in our baseline, which would have a downward impact on our GDP forecast of 3.5% for 2025.

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