Growth on divergent paths

Dünya Executive - - REPORT - Durukal Gun, economist, Barclays Capital

In Turkey, while the economy had a positive start to 2018, with a sequential accelerati­on in Q1 18 GDP (2.0 percent vs. 1.7percent q/q in Q4), the risk of a pronounced slowdown has increased. The abating effects of credit impulse and fiscal stimulus, combined with detrimenta­l effects of the sharp Turkish lira sell-off and tightening financial conditions, will weigh on domestic demand from the second quarter of this year. The ongoing recovery in tourism and an anticipate­d pickup in euro area growth in H2 following a weak H1 18 could provide a partial offset – though this is likely to be limited. High-frequency macro indicators point to a visible loss in growth momentum into the second quarter: the PMI index and economic confidence index fell sharply in April and May, and credit growth continues to slow. We expect a visible slowdown in the second half of this year, with a sequential contractio­n in Q3 18 and likely in Q4. While we acknowledg­e low visibility on the postelecti­on setting, we revised our growth forecast for 2018 lower to 4 percent and 2019 to 3.2 percent year on year. (June 15)

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