Türkiye | Still solid domestic demand in 1Q24

Summary

After the strong growth performance in 2023 with 4.5% y/y, we nowcast an acceleration in GDP growth rates in 1Q24 with 5.5% annually as of March. We maintain our 2024 GDP growth forecast of 3.5% given the solid performance in 1Q, the pre-election fiscal impulse and expected capital inflows.

Key points

• Key points:
• On the supply side, quarterly industrial production (IP) growth accelerated to 1.4% in January from -0.9% in 4Q23, showing a limited improvement in activity, particularly driven by strong consumption. Leading indicators also signaled the further recovery in February.
• Turnover indices in real term revealed solid performance in construction sector but deterioration in industry and trade sector as of January. Also, the contraction in services production is not broad based, mainly led by transportation and storage services.
• Private consumption has most recently started to gain pace especially on the back of high wage adjustment and still elevated inflation expectations, while the positive contribution of net exports to GDP recovered further, triggered by the ongoing correction in imports and stable exports.
• Aggregate demand remained stronger than supply, signaling that the tightening in monetary policy along with other policy measures have limited impact so far to correct the imbalance.
• Given the solid growth in 1Q and our expectation of an acceleration in capital inflows in 2H24, we maintain our GDP growth forecast of 3.5% for 2024. If the post-election policies become more restrictive, we will evaluate risks on our short term GDP growth forecasts.

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