Growth not growth?

Growth can be a tricky statistic. Here’s a breakdown of the Q2 result and what it means Growth in 2018Q2

Official stats show a growth rate of 5.2 percent in Q2 but the figure is misleading

1 What was the growth rate in the second quarter?

According to TurkStat, GDP growth was 5.21 percent in the second quarter. The twopoint decline compared to the first quarter indicates that the economy, driven by election-period policies, has begun to slow. Total growth in the first half of the year was 6.18 percent. The annual growth rate of the last of four quarters is still high at 7.82 percent.

2 What is the seasonally- and calendar-adjusted growth rate?

Seasonally- and calendar-adjusted data gives a much less promising picture. GDP grew by 0.93 percent compared to the previous quarter while the annual growth rate is 3.79 percent. Considering that this was 1.55 percent in the first quarter, there is also a significant slowdown here.

3 What is the total GDP in dollars?

Despite 5.21 percent growth, the total output of the Turkish economy in the second quarter was $204.28 billion, nearly the same as Q2 last year. Similarly, annual total GDP - $881.65 billion - remained unchanged. The increase in currencies is affecting the real value of GDP in dollar terms. This effect will increase in the coming period.

4 What is per capita GDP?

The long-standing volatility in the dollar value of GDP per capita continued in the second quarter. According to our calculations, the GDP per capita was $10,908 in the second quarter. This is slightly below the level in the first quarter of 2018 but above the 2017 year-end.

5 What was the development in the CAD to GDP ratio?

In the second quarter of this year, the current account deficit amounted to $14.98 billion compared to $204.28 billion GDP. Accordingly, the CAD to GDP ratio remained at a dangerously high level - 7.33 percent. Annually, with a total GDP of $881.65 billion and CAD of $57.52 billion, the ratio stood at 6.52 percent. At the end of the first quarter last year, it was 6.28 percent and dropped to 4.21 percent at the end of the second quarter.

6 What are the sectoral growth rates?

The locomotive of the economy, heavy industry, which grew 8.15 percent in the first quarter, grew by 4.31 percent in the second. Construction growth, 6.57 percent in the first quarter, almost came to a halt at 0.78 percent. The total growth rate of trade, transportation, storage, accommodation and food services, which constitute the foundation of the services sector, was 7.99 percent, a loss of 2.41 percentage points compared to the first quarter. Among the services sector, the sectors that showed increased growth were only finance and insurance, public administration, education, health and social services.

7 Consumption expenditures

Private consumption expenditures grew by 6.33 percent in the second quarter and represented 3.78 points of the 5.21 percent total growth rate, a significant decline from the 9.35 percent in the first quarter. A 2.27 percent contraction in durable goods consumption, an important indicator of the health of private consumption, is a bad sign going forward. On the other hand, the growth of final consumption expenditures of the government accelerated from 4.92 percent in the first quarter to 7.18 percent in the second quarter.

8 Investment growth

Investments have also experienced a serious slowdown and structural deterioration. Investment growth, which was 7.94 percent in the first quarter, stood at 3.91 percent in the second, mainly due to the lack of growth in construction investments. The second quarter growth in construction investments was 6.62 percent while machine and equipment investments grew only 0.55 percent.

9 Exports and imports

As a result of the increase in exchange rates, the 0.67 percent growth rate in exports in the first quarter increased to 4.54 percent in the second. On the other hand, the 15.36 percent growth in imports in the first quarter declined to 0.26 percent. Thus, the net contribution of foreign trade in the second quarter growth was 1.07 points.

10 What does the 2018Q2 GDP data signal for the future course of growth?

Second quarter GDP figures indicate that the high growth rates created by the comprehensive incentives and high public spending during the election period are over. The incentives, some of which were only applied during the election period, and declining public spending due to deteriorating budget balances will put the brakes on growth. The economic and political risks and vulnerabilities, both internationally and domestically, will start to be felt more intensely. Rapidly rising currencies and rising interest rates in the third quarter may lead to greater declines in growth.