Concerns for the growth rate

The seasonally-adjusted gross domestic product (GDP) figures from the first quarter to the second quarter are quite lower than expected; there was only a 0.3 percent increase. When viewed annually, in the second quarter of 2016, Turkey’s economy was able to grow only 3.1 percent, a rather low rate. 

The two main items pulling the growth rate down have been net exports and private consumption. The exportation of goods and services declined at a high rate of 2.8 percent which, combined with the drop of 0.5 percent in private consumption, has negatively affected growth. The private investment item, which grew above expectations at a rate of 6 percent, as well as the increase of 3.5 percent in public expenditures, brought a limited increase to the GDP. 

This data disclosed at the end of June, as well as data for the months of July and August, is causing pessimistic interpretations about growth. As a result, despite the end of year target of 4.5 percent, if a growth rate of 3 percent is achieved, it would be regarded as a success. 

Industry production which slowed in June shrank at a very high rate of 8.4 percent in July. Since 2009, a monthly drop to this extent had not been seen. The calendar-adjusted industry production figure also declined 4.9 percent.

The picture for the data in the manufacturing industry in August does not look good either. Capacity usage rates show that weakness in production continued in August; the capacity usage rates for consumer goods in particular have had a distinct fall in the past 10 months. The Purchasing Managers Index (PMI) fell from 47.6 in July to 47 in August, confirming the continuation of an increasing shrinkage. 

The only consolation of bank analysts is that there was an increase in the level of export orders in August. Among the sub-indexes that form the economic confidence index, the real sector index and sectorial indexes all showed a decline; only the consumer confidence index had an 11 percent increase. Analysts attribute the reason consumer and real sector indexes are in opposite directions to the effect of the dates the surveys were carried out. They are also saying that the falling foreign exchange rates lately could be effective on consumer confidence. 


Tough second half 

The growth that made a negative surprise in the second quarter is not expected to recover in the second half of the year; on the contrary, the expectation that the fall will continue prevails. When we consider that one-third of September is being spent on vacations, this month does not give any hope either. 

Growth rates are important again because the inflation rate already has an upward trend; a drop in growth may cause a decline in incomes gradually and then this may cause the disruption of fiscal discipline, which is the only anchor left for us. When we consider that global developments and political incidents are far from being bright, the effect of a disruption in economic balances may be harsh.