GROWTH ANALYSIS

THE ACCEPTED argument as so far been that due to precautionary measures, coronavirus cases in Turkey were detected later than other countries and accordingly, the impact of the pandemic was softer. Turkey announced its first coronavirus case in March after China confirmed its first case in December and the pandemic engulfed Europe during the first two months of the year. We were always cautious, health personnel were ready and Turkey was prepared for the fight. But being prepared economically, especially in production, was out of the question.

After the first case, production halted at the end of March.

The Turkish economy grew 4.5 percent during the first quarter of the year, and this was taken as normal. But the expectation was much higher than 4.5 percent.

Because the outbreak interrupted production at the end of May, the impact of the virus is nearly nonexistent in the first quarter. The economy declined the same amount in the same period of last year, meaning there’s also a base effect.

Yes, this 4.5 percent growth puts Turkey among the fastest-growing countries, but it’s important to question the reason for this growth and the reason why the economies of other countries declined: First, the outbreak’s impact on Turkey came very late. Second, the base effect.

If you compare first quarter growth this year to 2018, it is only 2.1 percent. You can’t fool anyone. The 4.5 percent growth in the first quarter does not reflect the power of the Turkish economy. This growth rate was a result of a high number of days without the virus and the base effect.

For those who argue the opposite, I recommend waiting for the second quarter. It’s bad when someone fools others, but it’s even worse when people fool themselves.

I don’t know if it’s optimistic to cheer for the economy after the first quarter’s growth result or if I should read the situation a little differently when the economic administration and some officials in the government expect a decline in the economy throughout the year.

APRIL AND MAY ARE IMPORTANT

The impact of the coronavirus was visible during April and May. The industrial production data is yet to be announced but at least everyone knows how the capacity utilization rate decreased in April. Everyone knows that if the Central Bank’s real sector confidence index signals an improvement in May, it reflects estimations for the next months. So it means production was low in May, just like in April. Production declined significantly during these two months. As of today, the economy is going back to normal. We will see if this normalization will impact production positively, especially in industry, or cause a decline in supply.