While the Turkish economy recorded a 7% growth performance compared to the same quarter of the previous year, with the after effects of high credit expansion carried over to 1Q21, consumer demand and industrial production, it grew above the G20 excluding China in local currency terms. While the side effects of the growth achieved by the encouragement of the high loan growth recorded in 3Q20 returned as currency instability and inflation; As of the end of 1Q21, we are again at risk of increasing the effects of factors causing instability in TRY. In an environment where the economy is growing amid inflation, the uncertainty in interest rates and inflation that cannot be lowered; therefore, the interest rate, which cannot be lowered, may also pose a downside risk on growth.
While the growth exceeded the market expectation of 6.3% with its 7% performance in 1Q21, the periodical growth between 4Q20 and 1Q21 was 1.7%. Between the relevant periods, a tightening monetary policy was adopted in order to balance credit growth and rein in inflation, and interest rates were raised, and the monetary authority entered into a strong communication. In this context, the investment environment improved slightly, albeit partially, portfolio inflows showed a positive trend and the country risk premium decreased. However, by the end of 1Q21, the abandonment of this strong monetary policy orientation and the depreciaton of the currency; It has made it difficult for decision makers to maintain macroeconomic balances, prevent inflation and normalize interest rates.
If we look at the details of the growth; Household consumption expenditures increased by 7.4% in 1Q21 compared to the last quarter of the previous year. Government expenditures increased by 1.3% in 1Q21, while gross fixed capital formation (investments) grew by 11.4%, reflecting the contribution of still high loan growth and consumer demand. While the exports grew by 3.3%, imports contracted by 1.1%. In growth rates according to sectoral and economic activity branches; With 18.1% in information and communication activities, 14.4% in other service activities, industry with 11.7%, agriculture, forestry and fishery performed above the headline growth with 7.5%. While real estate grew by 2.4% and construction with 2.8%, reflecting the effect of increasing interest rates in 1Q21 as the items that grew the least; it is seen that the financial and insurance activities, which showed high growth with the new normals of the pandemic in previous quarters, grew by 2.9% due to the comparative period effect.
While the GDP, which was 4 billion 320 million TRY in 2019, grew to 5 billion 47 million TRY in 2020; In USD terms, there is a decline from 761 billion USD to 717 billion USD from 2019 to 2020. There is an “exchange rate illusion” in Turkey’s economic growth data. While registering growth in nominal and real GDP on TRY basis; In USD terms, the economy has been shrinking continuously after 2017. GDP per capita in USD terms has fallen by about 40% since 2013 to approximately USD 7,700 last year. Turkey’s latest economic model is not sustainable, as growth is driven mainly by consumption supported by government spending and credit campaigns. This, in turn, causes TRY to become worthless and price stability cannot be achieved during the implementation phase of economic policies.
Kaynak Tera Yatırım
Hibya Haber Ajansı
Kaynak: Hibya Haber Ajansı