Türkiye | Gradual rebalancing in the economy

Industrial production (IP) fell by 1.4% m/m in seas. and cal. adj. series, while increasing by 0.2% y/y on calendar adjusted terms. GDP growth will likely materialize closer to 4.5% in 2023 but decelerate to 3-3.5% in 2024 led by monetary tightening and poor foreign demand.

Key points

• Key points:
• Despite the broader worsening in sub-sectors, the decline in non-durable goods production was more evident with 3.8% in this period, followed by intermediate and energy goods production (-0.8% both).
• Turnover indices in real terms (adjusted by CPI) indicate that activity in other sectors continued to weaken but much more slowly and the adjustment in IP remained to be much deeper.
• Our GDP nowcast indicators signal a worsening production outlook with almost 0% quarterly GDP growth rate, which correspond to an annual growth rate of 3.5% in 4Q23 (32% info.) and 2.9% as of January (23% of info.). On demand sub-components, they indicate that private consumption and investment remained solid while the contribution of net exports has recovered in 4Q23.
• All leading indicators show that domestic demand remains quite stronger than supply, pointing out continuation of upside risk on both inflation outlook and current account deficit.
• Under the assumption of tight monetary policy throughout the year, weak foreign demand and accelerating capital inflows after the local election, GDP could decelerate to 3-3.5% in 2024, where fiscal policy stance will be one of the determinant factors on the overall impact.

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