Strong start to 2018

First quarter growth data for 2018 was announced yesterday, with Turkey’s economy showing a 7.4 percent development in this period compared to the same quarter of the previous year, displaying one of the world’s leading and strong performances. Frankly, the data was also implying that we would see strong gross domestic product (GDP) data in this period. In addition to this, there is benefit in taking a closer look at data for Q1, which reveals economic activity, to better understand the content.

In this context, I would first like to open a window from the perspective of supply. Because we would need to see which sectors support our growth story and how balanced the situation that this reveals is. When we look purely at their speed of growth, it is a fact that the figures seen in various sectors ranging between transport, trade, accommodation and restaurant group to industry were mostly strong. Hence, it is possible to talk of a production spread throughout the sectors in this period as well, and thus, an increase in GDP.

If we were to calculate in this scope how much the 7.4 percent growth fed on which category, it is possible to say that the service sector is once again in the lead role with 4.3 points. Meanwhile, industrial production’s 1.9 percent contribution to the first quarter is proof of the strong performance indicated previously by primary indicators. While the construction sector gifted 0.5 points to the economy’s Q1 rate, agriculture joins this tableau with 0.1 points.

Right at this point, let’s look through another window, approaching growth through demand. Hence, as is known, it is important to understand to what degree and nature the domestic and foreign demand adds speed to economic tempo. When we evaluate the 7.4 percent development from this angle, it is clearly understood that we see a picture of Q1 triggered by domestic demand. Because we see quite serious and even accelerated developments in special consumption and investments in this period. This translates to 6.7 and 2.8 point contributions, respectively, in household consumption and from public and private total investments to GDP development. Hence, while consumption presents quite a lively profile in the first quarter of the year, the appetite in investments appears to increasingly continue. While the development of construction takes the lead in the composition of investments with 12.3 percent, the increase in machinery and equipment is continuing on its path with a 7 percent increase.

While the domestic demand dynamics in the first three months of the year can be summarized within this frame, there is a different situation in foreign demand. Hence, while the real contribution of export in this period remains at 0.1 points, the activity in export seems to have repressed growth from the outside at 3.6 points net. I had discussed it before, with the impact of energy prices and partial effect of gold, import gained momentum in the first quarter and opened the gap with export. Thus, the GDP details in question present the reflection of the goods trade of the situation. As for the second quarter, it seems that in the event the slowdown that emerged in import continues, the discrepancy will be more limited. In other words, I would expect the net export effect of goods and service to relatively normalize in the next period.

To be honest, as I mentioned earlier, our economy appears to have entered a general adjustment period toward the second half of the year. In accordance with this, the policies to be followed after the elections are of critical importance in terms of our economy’s health and future. Our economy clearly demonstrated in 2017 and 2018 first quarter data that it can quickly recover from a difficult period. At the point reached – just like President Recep Tayyip Erdoğan mentioned within the scope of his election manifesto – a set of policies that will continue on its path with improvements in indicators such as inflation and current deficit, without ever drifting away from the financial discipline path along with ideal growth, will open important pages in the name of our future. And the sections of the set of policies in question that point to a transformation that will get the economy to jump a level, will also, without a doubt, be the new generation seeds of the future.

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