I’m going to talk about the growth rates for the last time and end this discussion once and for all.
It can be seen that manufacturing industry and investments are in significant decline, let alone making any contribution to the economy during the third quarter of the year. Apart from that fact, increasing inefficiency of the factors that would normally contribute to GDP growth has enabled exports to further contribute to Turkish economy. If Turkish GDP has grown by 1.6%, we owe this progress to increased government spending, high consumption and exports. Considerable decline in all-time champion, ‘construction sector’, doesn’t go unnoticed either.
I couldn’t really make sense of some of the experts’ expectations for a 2% GDP growth in the third quarter, because among them, there were experts even expecting GDP growth to turn out to be 0.5%. I, on the other hand, have been expecting something around %1. I guess I wasn’t completely mistaken in my prediction. However, I must say that the numbers have turned out to be higher than expected (at least higher than my expectations). But, let me underline that these growth numbers may have been made look like ‘low’ to avoid any suspicion.
As GDP growth rate of 2018 will probably be released before local elections, I think we can expect CBRT to go through with at least one rate cut, which will naturally bring positive as well as negative impacts.
“Should we expect a rate cut in January?”
As Inflation and Growth rates are simultaneously declining, I can guess CBRT may take a couple actions to help Ankara breathe a sigh of relief. But December is probably not the right time for this.
As I have mentioned yesterday, Turkey is facing such alarming levels of inventory depletion for the first time since 2009 Global Financial Crisis. Companies have not made any move yet to replenish depleting inventory. According to current data, Turkish household consumption which has somehow survived the third-quarter will shrink in the fourth-quarter, which leaves no reason for companies to pile up inventory.
Accordingly, Turkey seems likely to go through an economic shrinkage in the final quarter of this year. I don’t think this will be a big surprise for anyone since the possibility of an economic shrinkage has been clearly stated in the NEP (New Economic Plan) presentation.