Turkey GDP Data: Time for an Overhaul?

2

Turkey posted its first negative GDP growth figure in seven years in Q3 2016 when it abruptly announced a methodology change in the calculation of the macro economic variable just the day before the official statement. After having released reports for more the two consecutive quarters when each reading exceeded the consensus estimates by wide margins, it prompted skepticism from many economists. In our view, these skepticism is partly justified due to the disconnect between the headline figure and the underlying data and the backdated revisions that refrain analysts to make sound assessments.

Here we aim to contribute to the debate with some intriguing findings. It is an interesting finding that the a relationship breakdown became apparent between a substantial component of consumption which Turkey’s economy mainly relies on and the economy itself. The chart above demonstrates the total credit card portfolio of the household in the banking sector as the percentage point of nominal GDP. One would expect to see some slowdown due to the changing characteristics of the economy and some restriction applied by the regulators in order to harness the consumption which usually drives the current account deficit into unsustainable levels,however, the drop is definitely sharper than anyone would have thought.

So, there is for sure no reason think that banks are under-report their balances, ┬áthe problem might with the GDP data. In that sense, we are still not the members of the skepticism club and there appears to be need for seriously review the current methodology since it probably ‘misses’ some facts about the economy. Other than that, it is not an imperturbable action to raise an issue about Turkey’s overall data quality.

Share.
  • muaydemir

    Dear Oguz, Thank you for this analysis. However, I do not get the message. What is your point here?
    It would help if you compare and contrast the “old” GDP methodology with the “new” calculation method.

    Who changed it, and why did they change it? What are the advantages? What are the disadvantages?

    It is too simple to select any ratio “as % of GDP” to make your point when the GDP is now different (higher). Obviously, most ratios reported as % of GDP will be affected. Am I missing something here?

    Thank you for your response.

    • Hello, once again my aim was to provide some insight in an unpopularly implicit way. First, I’d like to share a Bloomberg article on the change in the methodology.

      https://www.bloomberg.com/news/articles/2016-12-12/turkey-catapulted-above-india-as-government-revises-gdp-math

      I also mentioned it in previous article, the second paragraph at the following link might be informing http://turkishmarketnews.com/q2-recap-economy-regaining-momentum/

      What I focus on this article is the divergence between the GDP and the pre-indicator of the most substantial component of it. Credit card volume is arguably works finely for foreseeing the strength of the household demand. But its share in the economy is increasingly becoming less and less which partly justifies the skepticism growing around Turkey’s newly introduced GDP calculation. Or maybe, the household is so so squeezed financially that its incentive to consume has weakened remarkably. That might be true to some extent and still does not explain the whole story here.