View of Istanbul. Photo: Wikipedia Commons
View of Istanbul. Photo: Wikipedia Commons

Turkey’s strong economic growth in the second quarter looks to continue into the third quarter and for the rest of the year, write Citibank analysts. While the 5.1% YOY growth last quarter came in slightly under consensus estimates, it was close to Citibank’s projection of 5.0%. Strong stimulus measures, along with a benign global backdrop has helped fuel the expansion:

The outcome is largely driven by the strong export performance (10.9%YoY) and gross fixed capital formation (9.5%YoY), which is largely driven by construction, as imports (2.3%YoY) and private consumption (3.2%YoY) remain relatively subdued (Figs. 1 – 6). In parallel, the momentum continues to be strong with 2Q GDP growing 2.1%QoQ (SWDA), above the historical average of about 1%QoQ.

Turning to the supply side, financials & insurance (10.1%YoY), industry (4.7%YoY), construction (6.3%YoY) and information & communication (5.7%YoY) stand out. In addition, services and public administration, education, human/health/social activities emerge as sectors performing below their respective historical averages.

In our view, the combination of a benign global backdrop and strong stimulus measures has provided a considerable cyclical boost to activity.

This, coupled with the robust export performance, has played an important role in the observed growth spurt. While the weaker link between high-frequency indicators and the new GDP series makes it harder for us to predict growth, we expect another strong GDP reading in 3Q (around 7%YoY) thanks mainly to a strong base effect. Developments to date suggest to us that overall GDP growth is likely to be fairly strong for the year as a whole, at around 5% (vs. our previous estimate of 4.5%).