Turkey | GDP slumped but beat market expectations

Summary

Turkish economy contracted by -9.9% in yearly terms in 2Q20. The growth rates in services and industry, sensitive to the Covid-19 shock, were the key factors behind. We revise our 2020 GDP growth forecast to -1% from the previous 0%, keeping the same forecast range from -3% to +1%.

Key points

• Key points:
• The negative impact of the Covid shock deepened in 2Q20 and economic activity contracted by 9.9% in annual terms, led by the historically deepest quarter-on-quarter contraction of 11%.
• On the demand side, domestic demand gave a negative contribution of 2.1pp, while net exports dragged down a record of 7.8pp from the yearly GDP growth rate.
• Our Big Data proxies and other high frequency indicators have already signaled a strong recovery pattern since mid-May
• We have recently adjusted our 2020 GDP growth forecast to -1.0% from the previous 0% on the back of the recent monetary tightening and financial volatility, but maintained our initial forecast range between -3% and +1%.

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