Turkey: Upside risk to 5% growth forecast

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Recent data showed that the Turkish economy grew 7.0% in annual terms during the first quarter of 2021 and 1.7% from the previous quarter. BBVA analysts Research note that the current strong momentum, ongoing credit growth and positive global outlook put upside risks to their cautious 5% growth forecast for 2021.

Key quotes:

“Domestic demand gave a solid contribution of 6.0pp, while the contribution of net exports turned positive (1.1pp) for the first time after 5 quarters. All sectors gave positive contributions in year-on-year terms, where the greatest support was from industry with 2.5pp, followed by the contribution from the commerce, transport and accommodation sectors of 1.4pp. “

“The slowdown is not yet clear so far due to the reopening and continued credit growth rates at moderate levels. Private consumption still accelerates while investment stabilizes as of May. “

“The current strong momentum, moderate but continued credit growth, and more positive global growth prospects reinforce risks to the upside of our cautious 2021 GDP growth forecast of 5%. On the downside, tighter financial conditions, downside risks to tourism revenue, and the end of the ban on layoffs and short-term job assignments in June add to uncertainty. However, a positive surprise is now more likely given the pending reaction of the economy with the reopening at the end of May ”.

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