Türkiye | The economy grew 4% in 1Q23

Turkish economy grew by 4% y/y in 1Q23 in line with market expectation (vs. 3.9% consensus and 4.3% ours). Assuming no sharp normalization in economic policies ahead of local election in 2024, we expect GDP growth to be in the range of 4-5% in 2023 on the current strong momentum and expected loose policies.

Key points

• Key points:
• The continuation of populist fiscal policies along with relief and reconstruction efforts in the quake region, toppled with extremely low interest rates in the pre-election period led to persistent consumption (10.8pp contribution) driven growth.
• Contribution of net exports to aggregate demand remained negative (-2.8pp), while domestic demand (excluding stocks) was the main factor to support annual growth (12.8pp).
• On the sectorial side, construction reinforced its contribution to annual GDP growth whereas broad-based services continued to be the main contributing sector to growth.
• Our monthly GDP indicator nowcasts 4.6% y/y growth as of May (with 27% of info.) confirming that the recovery in the post-quake period will continue, as also hinted by the leading indicators.
• Strong domestic demand will likely continue, which will add upside pressure on inflation and reinforce external financing needs in the near future.

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