First half growth may be 4-4.5 percent

The March industrial production data released last week turned out to be higher than expected. Upon this, debates about growth have started again. Estimates point to the first half of this year having a good growth rate.

While market experts were more pessimistic in the first months of the year, upon the latest data they started increasing their growth forecasts for this year. However, we can say that the growth rates for Turkey that were released at the beginning of this month by such organizations as the IMF, the World Bank and the OECD are still at around 2.5 percent.
 
Even though it is currently still difficult to make estimations for the entire year of 2014, more concrete estimates are possible for the first quarter and the first half. Market experts estimate that the growth rate for the first half of this year will be between 4 percent and 4.5 percent. Indeed, there are others who estimate above and below these rates, but forecasts related to the first half are generally optimistic.

However, on the other hand almost nobody is optimistic about the spreading of these growth rates through the entire year. Even though there has lately been more optimism, we can say that growth estimates regarding the entire year are still at around 2.2 to 3 percent. However, it is also being noted that a healthy estimation was not able to be made and that more data is needed.

When the March industrial production is seasonally adjusted, it was at 4.2 percent annually, much higher than the market expectation of 2.4 percent. Thus, the yearly-based acceleration of industrial production of 4.4 percent, which was recorded in the last quarter of 2013, has continued at 5.4 percent in the first quarter of 2014. In the seasonally-adjusted base, on a monthly basis, a 0.4 percent decrease is calculated, but on a quarterly basis it is a rise of 1.4 percent.

Compared to the first quarter last year, the fact that for the same period this year there has been a 5.3 percent increase leads to estimations that the first quarter growth figure, to be announced on June 10, will be around 5 percent. However, in the second quarter it is thought that production may lose some acceleration. For this reason, the growth of the first half is estimated at around 4 to 4.5 percent.
[HH] 3 percent is a success

One of the most important reasons for this is that a proportion of the industrial production in the first quarter was production for stocks. Even though it is not definite yet, the stock share in production and mixed signals in other data lead to expectations that the acceleration will be lost in the second quarter and further decrease in the second half of the year.

For this reason, the end-of-year growth estimates are following a continually decreasing trend.

As is known, the government’s growth target for this year was 4 percent. However, economy managers, primarily Deputy Prime Minister Ali Babacan, have declared that the actual growth will fall below this year’s target, even from the beginning of the year. The impression we have is that the economic administration is fine with the 3 percent figure as this year’s final growth rate. Their fear is the destruction caused by a high growth, accompanying high inflation and a high current account deficit, in macro equilibriums. In my opinion too, 3 percent growth can be regarded as a success for this year.