As usual: A Brief Analysis of Growth…

I gave a conference talk hosted by the South-eastern Anatolia Exporters’ Associations (GAIB) on Tuesday. For this opportunity, I would like to thank the Associations, and Gaziantep Chamber of Commerce, and Industry. It was a great pleasure for me to be together with Professors Sadi Uzunoğlu and Erhan Aslanoğlu and to be given the chance to join this conference with Mert Yılmaz as key speakers. I would also like to express my gratitude to Chair Erhan Özmen for his hospitality.

After sharing my analyses on economy, diplomacy, and politics with the audience, I also talked about the latest growth figure. Let me say the numbers again in today’s report and briefly give you an overall analysis.

The growth figure was no surprise to anyone. We see a 7.3% growth in the first quarter, which is slightly above the expectations. Turkey’s GDP in the first quarter grew by 1,2% compared to the previous quarter, which is slightly below expectations.

As for the components of the growth: The highest growth in the main groups occurred in consumer spending. Household spending seems to have gone up by 19.5% in the first quarter of 2022 when compared to the same quarter of the previous year. Government spending, on the other hand, grew by 0.9% and gross fixed capital formation by 1.1%.

Foreign trade contributed as follows: Exports of goods and services increased by 16.8% and imports by 2.3% in the first quarter of 2022 when compared to the same quarter of the previous year. The contribution of exports to Turkish GDP has been noticeably increasing for the past few months.

As far as the contribution of the main sectors goes, it can be seen that the growth performance of the industry lags considerably behind the services sector. While the industry grew by 7.4% compared to the same period of the previous year, the services sector appears to have grown by 14.9%.

As the 0.9% growth in agriculture shows that things are not going well in the sector, the 7.2% shrinkage in the construction sector, on the other hand, clearly explains why low loan interest rates are constantly provided to this sector.

“Labour is paid less and less… “

As the fact that the investments in machinery and equipment are increasingly growing shows that the expectations from the industry have not yet deteriorated, the contraction in construction investments refers to the possibility that the sectoral contraction may continue in the second quarter. We will see whether low-interest home loans and rising home prices will be enough to stimulate the sector.

Interestingly, labour payments increased by 59.7% in the first quarter of 2022, but its share in gross value added went down compared to the previous year, to be exact, it dropped to 31.5% in 2022 compared to % 35,5 in the first quarter of 2021. The reason for this may be that the adjustment of nominal wages lagged behind the inflation in the first quarter and did not rise since then, informal employment that significantly increased due to heavy immigration, or increasing rise in informal payments. To be honest, this matter requires further data and analysis in order to help me provide a more exact answer.

In conclusion, the growth figure is obviously fine, but there are problems in the contributing components. Financing the market with low interest rates, achieving record highs in exports, pandemic lockdown restrictions coming to an end and so on appear to have kept the economy afloat. I think the fact that exchange rates are rising again in the second quarter will negatively affect our GDP.