First Growth, Then Inflation…

Turkey’s inflation rate is to be announced today. I will discuss the result in detail tomorrow morning. But let’s take a look at the GDP first.


I shared with you my growth expectations earlier last week. The second quarter growth figures turned out to be in line with my expectations. Besides, capacity utilization rates, industrial production figures, and profit indices in April, May and June indicated that Turkey’s GDP would grow by over 7%, as it did in the first quarter.


Turkish economy Grew by 7.6% y/y in 2Q22, Turkish economy was supported by:


– Industry (7.8%)

– Services (18.1%)

– Finance (26.6%)


Agriculture, which declined by 2.9% in the second quarter and construction, also contracted by 10.9%, showed us that the price increases in these items will continue over the next period. While the demand remains the same, the shrinking supply unavoidably brings about a rise in prices. In the meantime, Turkey is faced with a very serious migration The same situation took place almost 100 years ago when Istanbul’s population grew drastically, real estate prices and rents have gone up at an astronomical rate due to those fleeing Hitler’s Germany. Today, it is invaded by Ukrainians, Russians, Syrians, Afghans, Iranians, and people from other countries escaping the chaos, dangers, and sanctions in the region.


“National Income in terms of Expenditure…”


As for the other side of the equation, household expenditures currently are at a very high level with 22.5%, followed by exports with 16.4%. In the first quarter, household consumption and exports again took the lead. Imports is ranked third place with 5.8%, while capital formation with 4.7% and public expenditures with 2.3% also seem to have contributed to the economic growth.

In fact, it is important that the increase in capital expenditures continues, but it is necessary to look at how much of it goes to machinery and equipment purchases, which means renewal and capacity increase, and how much of it goes to buildings.


The survey results and indices clearly reveal that the next quarters will not be as cheerful. However, in order for Turkish economy to finish 2022 with a growth rate of less than 4%, it has to remain stable in the last two quarters, which seems quite unlikely to me. In the worst case, I think the year will end with a growth rate of 4 to 5%. I am thinking that slightly more modest figures will be announced, considering the high growth rates in the last two quarters of last year.