Turkey | The recession is over but risks are alive

Summary

Turkish Economy contracted by 2.6% in annual terms in 1Q19. The economy is now technically out of the recession as the quarterly growth in seasonally and calendar adjusted terms turned into positive by 1.3% after the decline of three previous consecutive quarters. We maintain our GDP growth forecast at 0.3% for 2019.

Key points

• Key points:
• The end of technical recession is confirmed by 1Q19 realization.
• The deepest negative contribution of stocks in the current series suppressed the overall contribution from domestic demand (-12.1pp), while the support from net exports set a new record high level (+9.4pp).
• Our nowcasting on demand subcomponents gives signals of further recovery, but with some loss of steam especially on the consumption side.
• The renewed high volatility in financial markets, and political and geopolitical uncertainties put downside risk on our growth forecast.
• A prudent policy mix remains key to maintain the recovery path alive.

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