Revisions in GDP push growth above expectations
Turkey’s economy expanded by 2.9 percent last year, according to data released by the Turkish Statistical Institute (TurkStat), below the government estimate of 3.2 percent but well above the market expectation of between 2 and 2.2 percent.
There are two main factors behind this positive deviation. The first is that growth in the fourth quarter of 3.5 percent greatly exceeded market expectations. We can take a look at the details behind this figure and study whether there are inconsistencies with other statistics, such as industrial production and employment. But, in the end, this is the rate we have from TurkStat.
The other important factor that must not be forgotten that raised growth to 2.9 percent is the significant revisions to the size of gross domestic product in the second and third quarters.
TurkStat previously announced that first-quarter growth was 4.5 percent, and there was no change here. But second-quarter growth was revised to 5.3 percent from 4.5 percent, and the rate in the third-quarter contraction was revised to 1.3 percent from 1.8 percent. These revisions do not stem from changes in the 2015 growth rate, but due to improved figures in 2016.
Causes of the revisions I separated the four main sectors that account for between 60 and 65 percent of GDP from the rest to look at which sectors accounted for the revision. The four main sectors are agriculture, industry, construction and services, which last year accounted for 63 percent of GDP.
These four sectors and the other sectors had shown an improvement in the original figures for the second quarter of last year. As I’ve noted, GDP showed a not insubstantial improvement of 0.8 percent in the second quarter for a revised 5.3 percent growth rate. In the third quarter, the revision in the agricultural, industrial, construction and services sectors are noteworthy. The third-quarter revision saw an improvement of 0.5 percent.
Had the revisions in GDP in the second and third quarters not occurred and growth had remained at the originally announced rates, the 3.5 percent expansion measured in the fourth quarter would have meant full-year growth of 2.5 percent. The upward revisions of 0.8 percent in the second quarter and 0.5 percent in the third total a 1.3 percent improvement, while the impact on full-year GDP was 0.4 percent.
But even a 2.5 percent rate of growth would have been above expectations.
We have to accept that the new series for GDP calculation has not yet settled into place. The primary inconsistency is the disconnect with employment. In a year when unemployment broke records, especially in the final quarter, we have to ask how growth returned to such a conspicuous acceleration. In order to fully get the hang of the new GDP series, both its calculators and its users clearly need some more time.