Türkiye | The economy grew 5.6% in 2022

Turkish economy grew by 3.5% y/y in 4Q22 (vs. 3% exp. and 2.9% consensus), leading to an overall GDP growth of 5.6% in 2022. We maintain our GDP growth forecast at 3% in 2023 assuming expansionary fiscal policy and better global growth outlook will compensate the negative impact of the quakes.

Key points

• Key points:
• Domestic demand supported GDP growth through 2022 with 5.0pp contribution on the back of accelerating private consumption (12.1 pp) while investment remained very limited (0.7pp) despite the government ambition. As a result of stronger trend in aggregate demand than aggregate supply, inventories posted the highest depletion of all time (-8.5pp).
• Net exports showed a weaker contribution to annual growth with 0.6pp due to both slow-down in exports led by poorer external demand and real appreciation of the currency, and acceleration in imports on top of robust domestic demand.
• On production side, the total contribution of industry (0.7pp), construction (-0.6pp) and agriculture (0pp) almost equal to zero whereas broad based services sector especially on trade, transportation and accommodation (2.7pp) thanks to strong tourism season and financial and insurance activities (0.9pp) was the main driver of growth.
• Continuation of decreasing trend in the share of wages in value added signals further deterioration in inequality in favor of the owners of the capital.
• According to our calculations, the net negative impact of the quakes on GDP might get near 1pp in 2023 by taking into account the expected rise in fiscal spending and potential production compensation of the other areas.

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