Economic Update: 1Q15 GDP & April Current Account
- June 12, 2015
- Oguz Erkol
Gross Domestic Product
Turkey GDP grew by more than expected (2.3% versus 1.6%) in the first three months of 2015, data from Turkstats showed on Wednesday. Despite the fact that the reported figure signaled a below par growth in the country, we saw the pressure on Turkish assets easing for a while following the economic data. However, a rethinking about the country’s growth regime is needed given that for the last thirteen quarters it has been posting growth numbers below historical levels.
The strongest component of GDP was consumption in 1Q15 which was up 4.5%. The positive impact of boosted consumption was offset by the decline in net exports. The below is a visualized form of contribution of each components to GDP that shows consumption in Turkey has a strong (reverse) correlation with imports (net exports). At industry level, financial services sector appeared to the best performer in 1Q15.
Current Account Balance
From Dogan News Agency:
Turkey’s current account deficit fell by $1.52 billion to $3.41 billion in April, yet exceeded the expectations of $3 billion.
The unaccredited inflow of foreign currency rose to USD 2.89 billion in the same period, more than 10 times the USD 258 million registered a month prior, rising to USD 6.98 billion in the first four months of the year.
Other important reason that limited the rise in the current account deficit in April was gold exports of USD 1.82 billion, compared to USD 307 million of net imports in the same month of last year.
The 12-month rolling deficit fell to USD 44.26 billion at the end of April, down from USD 45.78 billion at the same period of last year. Current account stood at USD 2.0 billion in January, at USD 3.2 billion in February and USD 4.96 billion in March.
Another reason was direct investment outflows involving distributed profits under primary income item increased by USD 595 million to USD 892 million in April.
Portfolio investment recorded a net inflow of USD 755 million as an increase in net liabilities. As regards to sub items through liabilities, non-residents’ equity security transactions recorded net purchases of USD 652 million, as government domestic debt securities recorded net sales of USD 1.02 billion.
The country just printed another bad current account deficit which was 5.7% of the country’s total GDP. The following chart shows the ratio by countries where Turkey is shown red.
Ultimately, macro data shows that the structural reforms are needed for the future of Turkish economy. As the country is headed to a change in politics, we may also see a shift in economic