Report: Economic Indicators of Turkey – October 2012

Down below are the economic indicators of Turkey, reported as of October 2012. This data is compiled from various sources such as reputable banks – and originally from figures announced by TURKSTAT (Turkish Statistical Institute) and Central Bank.

Turkish economy in spite of the stagnancy in the major world markets has managed to avoid a likely crisis (as with Greece and Spain) so far. The government (although not favored by many due to its political practices) is to be credited for having kept Turkey in safe waters so far.

However, Turkey has been doing a little worse than expected and the economy has been decelerating for the last one year. Still it has been recorded to grow by 2.9% in the second quarter of 2012 compared to the same period of the previous year. Second quarter growth expectations by the market was 3.3% which means the economy has displayed the weakest growth performance since the third quarter of 2009.

Turkey which would have had great difficulties a couple of decades ago if it had had to go through such tough times, can still manage to realize growth figures such as 3.1% compared to the same period of the previous year.

Editor, BTT

 

GDP GROWTH

Calendar adjusted GDP recorded an increase of 3.2% in the second quarter of 2012 compared to the same period of the previous year. In the same quarter, seasonal and calendar adjusted GDP increased by 1.8% compared to the previous quarter.

Analyzing the growth figures via economic activity approach, it was seen that the services sector, which has the highest share in GDP, grew by 2.7% compared to the same period of previous year and made 1.6 points contribution to the GDP growth.

Industrial sector, which displayed a relatively stronger performance in the second quarter, grew by 3.6% compared to the same period of previous year. During the same period, the agricultural sector registered an increase of 3.5% and made 0.26 point contribution to the GDP growth. On the other hand, after having shown a remarkable performance in post-crisis period, construction sector grew by only 0.4%.

GDP growth around 3-3.5% is expected at the end of 2012.

CONSUMPTION

Decline in private consumption and investment spending was observed in said period.

Analyzing the GDP figures via expenditure approach, the slowdown in domestic demand in the second quarter became more evident. Especially, the deceleration in private consumption and investment spending which were the engines of economic growth in the post-crisis period was noteworthy. In fact, private investment and consumption spending pulled down the second quarter growth rate by 1.9 and 0.3 points, respectively.

Regarding the third quarter of 2012, private consumption and investment spending continued to stay weak.

On the other hand, continuation of the rebalancing between the domestic and external demand indicated the support of net exports to the GDP growth.

In this context, Turkish economy is calculated to have grown by around 2% in the third quarter of the year.

GDP growth is expected to to accelerate in the last quarter of the year supported by the start of CBRT’s expected interest rate cuts in upper bound of the interest rate corridor.

UNEMPLOYMENT

According to report announced by Turkstat, unemployment rate declined by 1.2 points to 8.0% in June compared to the same month of previous year. Hence, unemployment rate dropped to its lowest level since 2001. Seasonally adjusted unemployment rate, on the other hand, realized as 8.9%.

The number of people employed in June 2012 reached 25 million 577 thousand persons with an increase of 676 thousand persons compared to the same period of previous year. Thus, employment rate increased to 46.8%, its highest level in the last 10 years.

FOREIGN TRADE DEFICIT & CURRENT ACCOUNT BALANCE

According to figures announced by Turkstat, narrowing in foreign trade deficit continued in August.

While exports increased by 14.5% compared to the same month of previous year, imports contracted by 4.8%. Thus, foreign trade deficit declined to $5.9 billion, its lowest level since June 2010. Import coverage ratio, on the other hand, increased by 11.6 points to 68.7% compared to the same month of previous year.

In July, current account deficit (CAD) narrowed to a large extent thanks to the improvement in the foreign trade deficit and increasing tourism revenues. In fact, during the first seven months of the year CAD declined by 31% to $34.5 billion compared to the same period of previous year. As of July, 12-month cumulative CAD amounted to $61.4 billion while CAD excluding energy imports fell to as low as $3.3 billion.

BUDGET

In the first eight months of 2012, budget posted a deficit of TL8.5 billion.

The weak course of tax revenues as a result of the slowdown in domestic demand led to a deterioration in budget balance. In fact, in the first eight months of 2012 budget posted a deficit of TL8.5 billion. In the same period of the previous year, budget gave a surplus of TL2.1 billion.

Primary surplus, on the other hand, realized as TL27.2 billion in the first eight months and converged to year-end targets.

Tax Revenues

In the first eight months of the year, the increase in budget revenues was relatively low with 7.5%. During this period, corporate tax revenues recorded an increase of 6.3% while Value Added Tax (VAT) and Special Consumption Tax revenues, which are indicators of the pace of domestic demand, registered a limited increase by 2.6% and 6.4%, respectively. As a result of the decline in imports, VAT on Imports did not display any increase in the first eight months compared to the same period of the previous year.

CAPITAL MARKETS

In July, portfolio investment inflows were at a record level.

Analyzing capital and financial accounts, it was seen that net portfolio investments played an important role in financing the CAD deficit in July with an approximately $7 billion inflows, the highest monthly level ever recorded. Non-residents’ increasing demand for Government Domestic Debt Securities (GDDS) was the main reason behind this significant expansion in portfolio inflows.

Also, it was seen that nonresidents investments in equity securities amounted to $726 million in July which brought the first seven months total inflows to $2 billion.

On the other hand, in July, net foreign direct investments registered the second lowest level of 2012 after April, being realized as $473 million. In the first seven months of the year non-residents’ net foreign direct investments decreased by %6 compared to the same period last year and realized as $8.9 billion.

During the same period, residents’ direct investments abroad registered capital outflow worth of $2.7 billion.

BANKING SECTOR

Deposit volume increased by 7.3% compared to the year-end.

Total deposit volume increased by 7.3% compared to the year-end and reached TL785 billion. In this period, TL deposit volume, which followed a similar trend to total deposits, increased by 7.4% while FX deposits in USD terms expanded by 13.6%.

Credit volume increased by 9.8% compared to the year-end.

As of September 14th, 2012, total credit volume increased by 9.8% to TL762 billion compared to the year-end. Analyzing credit volume according to the credit types, the

21.3% expansion in consumer credit cards was noteworthy while other sub-groups kept their trend.

As of September 14th, 2012, net FX position of the banking sector was realized as (+) $1,456 million. Banks’ on-balance sheet FX position was (-) $18,804 million while off-balance sheet FX position was (+) $20,260 million.

Expectations…

It is expected that  the economic activity in Turkey will tend to accelerate to some extent during the rest of the year, owing to CBRT’s measures to support growth.

The strict measure taken by the government to receover budget deficits shows the administration is determined not to tolerate a big deviation from what has been foreseen.

20.10.2012
compiled by Editor, BTT