The Economy in Turkey 2018

The Turkish economy grew at a rate of 3.2% in 2016, largely due to the attempted coup and terror attacks. The outlook was negative in the beginning of 2017. Expectations for growth were in the range of 2.5-3% and the Turkish lira was losing value against the dollar. The early retreat of risk perceptions in tight market conditions supported growth, as did measures taken by the government to increase domestic demand. In the first 9 months the economy grew at a rate of 7.4%. However, this growth occurred alongside an increase in financial vulnerabilities. Inflation, foreign debt, loan-to-deposit ratios and budget deficits increased. In the first section we briefly analyze the economy in 2017 and in the second we give our expectations and forecasts for 2018.

We estimate that the Turkish economy grew at a rate of 7% in 2017. In the first three quarters, the largest contributor to the 7.4% rate of growth came from consumption expenditures, at 3.8% percentage points. While the contribution from investment was 2.3 percentage points, contribution from net exports was 1.5 percentage points. Public consumption only contributed 0.4 percentage points. Although the growth in investment, which had long been viewed as weak, is notable in the composition of growth, it is not possible to confirm the source of growth since the public and private sectors cannot be differentiated in the data. After recording weak investments in the first two quarters, we record an increase in the third quarter and a return to growth in machinery and equipment investments, which had declined in the last four quarters.

Download the full report: The Economy in Turkey in 2018