Türkiye | Sharp decline in activity due to quakes

Summary

Industrial production (IP) deteriorated sharply in Feb. contracting by 6.0% m/m on seas. and cal. adj. series, contrary to consensus (+2% m/m exp.). Considering recovery signaled by our nowcasts and assuming gradual policy normalization after the elections, we expect GDP to grow 3% in 2023 but risks remain on the upside.

Key points

• Key points:
• Industrial production in February reflected the disrupting impact of the quakes on the activity contracting by 6.0% m/m in seasonal and calendar adj. series, after making a strong start to the year with 2% m/m in January.
• Turnover indices and retail sales fell sharply in Feb. by 5.1% m/m and 6.5% m/m respectively, also confirming the negative impact of the quakes on the economy.
• Despite the downward effect of quakes on activity in February, both leading indicators and our big data signaled faster recovery than expected in March.
• Our nowcasting models signal around 4% of GDP growth in 1Q23, higher than our initial forecast, while domestic demand remained strong supported mainly by private consumption.
• We still believe that the best strategy in post-election period is to normalize policies more gradually in terms of policy rate and regulations.

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