Expect Turkey’s strong growth to continue into 2H: Citibank
5.1% growth in 2Q driven by exports, construction
Turkey’s strong economic growth in the second quarter looks to continue into the third quarter and for the rest of the year, write Citibank analysts. While the 5.1% YOY growth last quarter came in slightly under consensus estimates, it was close to Citibank’s projection of 5.0%. Strong stimulus measures, along with a benign global backdrop has helped fuel the expansion:
The outcome is largely driven by the strong export performance (10.9%YoY) and gross fixed capital formation (9.5%YoY), which is largely driven by construction, as imports (2.3%YoY) and private consumption (3.2%YoY) remain relatively subdued (Figs. 1 – 6). In parallel, the momentum continues to be strong with 2Q GDP growing 2.1%QoQ (SWDA), above the historical average of about 1%QoQ.
Turning to the supply side, financials & insurance (10.1%YoY), industry (4.7%YoY), construction (6.3%YoY) and information & communication (5.7%YoY) stand out. In addition, services and public administration, education, human/health/social activities emerge as sectors performing below their respective historical averages.
In our view, the combination of a benign global backdrop and strong stimulus measures has provided a considerable cyclical boost to activity.
This, coupled with the robust export performance, has played an important role in the observed growth spurt. While the weaker link between high-frequency indicators and the new GDP series makes it harder for us to predict growth, we expect another strong GDP reading in 3Q (around 7%YoY) thanks mainly to a strong base effect. Developments to date suggest to us that overall GDP growth is likely to be fairly strong for the year as a whole, at around 5% (vs. our previous estimate of 4.5%).