“Turkey’s GDP growth will turn out to be positive for two apparent reasons. First, GDP growth rate in the same period of the last year was quite bad. Second, Covid-19 epidemic has begun to affect Turkish economy by mid-March. So, let’s not get too excited if see positive GDP growth because we have some big challenges ahead” I twitted on Friday after the official release of the latest Turkish GDP data, which turned out to be 4.5%.
The components of the GDP growth numbers show us that Turkey is experiencing difficulties in terms of capital formation and export. Government spending and household spending are two key factors that held our economy together in the first three months of 2020. While Turkish economy kept its strength in the first quarter of the year, construction has, expectedly, deteriorated, and it looks like it will continue to do so. So, what will happen now?
Summer tourist season in Turkey starts on June 1. If, hopefully, a second wave of the pandemic doesn’t strike in autumn or winter, we may have future possibility to achieve a GDP growth slightly below 0% after a bit of contraction in the second quarter. As you may remember, Turkey had achieved positive growth in the third quarter of the last year.
“Fourth quarter will be the hardest…”
Everyone says that the second quarter will be the hardest for Turkey but I don’t think I really agree with that because we are already in the second quarter and we are already struggling. Instead of looking at a current period which GDP data will be released at a later time, we shall focus on a future period. We can’t change what’s happened but we may still have an opportunity to change the future.
So, I think the fourth quarter will be the hardest for Turkey since GDP growth rate in the last final quarter of the last year had turned out to be quite high. It’s not easy to exceed such a high number. However, if we can achieve a GDP growth around 3-4%, we can hope for an economic growth slightly below or above zero for 2020. That’s what I meant by “lost year”.
Last year everyone prayed that 2019 will be come and gone quickly. It’s actually not too bad to achieve the same performance we achieved last year considering the circumstances. But, overall, it’s been a huge loss. As I feel sad about the fact that Turkey makes no headway in a year where it was supposed to make big difference, I try to console myself thinking about our competitors who are in a worse situation than us.
As Turkish tourism and export keep struggling, increasing volume of import due to the recent rise in production volumes may bring pressure on FX rates. That’s something we should take seriously.