Türkiye | Risks become tilted to downside on activity

Weak performance recorded in the economic activity in 2Q24, points to the higher-than-expected impact of bridge day effects. Excluding these effects, the contraction in activity becomes moderate but still higher than our expectation. We assess that the risks to our 3.5% growth forecast for 2024 start to be to the downside.

Key points

• Key points:
• Negative impact of bridge day effects (additional holiday days due to extended religious holidays) do matter much higher than we had previously expected, since 2Q24 growth performance was lackluster, led by mainly 3.9% q/q decline in industrial production.
• Turnover indices signaled that industry and trade sectors were the main sectors to lead the correction in 2Q while services and construction seemed to prevent further deterioration.
• Leading indicators such as manufacturing capacity utilization rate together with confidence indices and economic tendency surveys signal a continued correction in economic activity in 3Q.
• Despite the recent mixed signals, the underlying trend on demand indicators displays an ongoing correction, which we expect to deepen further in 3Q considering tighter financial conditions.
• We evaluate that the risks start to be slightly to the downside on our 2024 growth forecast of 3.5% stemming from the slightly higher than expected correction so far and the negative calendar days impact. The magnitude of the expected fiscal consolidation and the duration of tight monetary stance will be decisive on growth outlook.

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