Turkey experienced modest GDP growth of 1.8% in Q2 2012 driven entirely by surging exports to Iran, while domestic demand fell. The central bank has eased monetary conditions to support a potential upturn in consumer spending and investment. GDP growth is forecast to be 2.7% in 2012 and 4.2% in 2013 as global trade recovers, but downside risks include a weak Eurozone or higher-than-expected inflation undermining policy credibility.

1. Turkey economic report
October 2012
Regional commentary
Upcoming events:
Seasonally adjusted GDP rose by 1.8% on the quarter in Q2, the fastest pace of Turkey
expansion since early 2011. However, this strength was entirely driven by surging
exports (boosted by extraordinary sales to Iran) while both consumer spending and
8 November 2012
investment actually fell on the quarter.
Development and opportunities in
The combination of faltering domestic demand, the weakness of the global economy the Turkish market
and the expectation that inflation would fall significantly during H2 has prompted the This seminar organised by White & Case
central bank to loosen monetary conditions significantly over the last few months. This will cover current hot topics impacting
easing, together with a still fairly healthy labour market, may lead to a modest upturn the Turkish market. It will include an
overview of the key changes to the
in consumer spending and offer some support to investment. But at the same time,
Turkish Commercial Code and the new
growth in exports is set to moderate. Overall, GDP is expected to rise modestly in H2
capital markets law and its impact on
but more significantly through 2013 as global trade starts to pick up again, resulting in
initial public offerings, project financing
growth of 2.7% in 2012 as a whole and 4.2% next year. opportunities in the infrastructure
industry and managing risk issues.
But there remain serious threats to these reassuring forecasts. First, if the Eurozone
were to break up, Turkey would be hit very hard by the resulting financial turmoil.
7 December 2012
Second, inflation could be more ‘sticky’ than the central bank assumes, which might Turkey Market Advisory Group
undermine policy credibility and push the exchange rate lower, adding to inflationary meeting
pressure and the likelihood of a policy reversal. In addition, the rapid growth of bank Members of the Group are invited to
credit over the last five years may be a source of instability in the future. the next meeting.
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Government Response to the House of Commons Foreign Affairs Committee
Report of Session 2010-12
This note sets out the Government’s Response to the House of Commons Foreign Affairs
Committee Report of Session 2010-12, initiated by TheCityUK.
TheCityUK’s evidence to the Foreign Affairs Committee - ‘UK-Turkey relations and
Turkey’s regional role’
This note sets out views on behalf of TheCityUK in the form of evidence submitted to the
Foreign Affairs Committee concerning UK-Turkey relations and Turkey’s regional role.
Contact
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2. Turkey data October 2012
Turkey: GDP and industrial production Turkey: Balance of payments
% year US$
30 5,000
Forecast
GDP F'cast
0
20
-5,000
10
Current account
-10,000 balance
0
-15,000
-10 Visible trade
-20,000 balance
-20 Industrial -25,000
production
-30 -30,000
2000 2002 2004 2006 2008 2010 2012 2014 2000 2002 2004 2006 2008 2010 2012 2014
Source : Oxford Economics/Haver Analytics Source : Oxford Economics/Haver Analytics
Turkey: Interest rates Turkey: Stockmarket
%
Jan-86=1
100 180
3 month
interbank rate 80,000
90 Forecast 160
(RHS)
80 70,000
10 year government 140
70 bond (LHS) 60,000
120
60 Consumer 50,000
borrowing rate (LHS) 100
50
Coroporate 80 40,000
40 borrowing rate (LHS)
60 30,000
30
40 20,000
20
10 20 10,000
0 0 0
2000 2002 2004 2006 2008 2010 2012 2014 2000 2002 2004 2006 2008 2010 2012
Source : Oxford Economics/Haver Analytics Source : Oxford Economics/Haver Analytics
Forecast for Turkey (annual percentage changes unless specified)
2009 2010 2011 2012 2013 2014
Domestic Demand -7.4 13.5 9.6 -0.5 5.1 6.0
Private Consumption -2.3 6.7 7.8 -0.1 4.5 5.6
Fixed Investment -19.0 30.5 18.5 -2.0 3.9 8.5
Stockbuilding (% of GDP) -2.2 0.3 0.0 -0.5 0.3 0.0
Government Consumption 7.8 2.0 4.5 5.9 4.2 5.1
Exports of Goods and Services -5.0 3.4 6.4 12.7 5.3 10.3
Imports of Goods and Services -14.3 20.7 10.9 -0.6 8.3 11.7
GDP -4.8 9.2 8.5 2.7 4.2 5.5
Industrial Production -9.9 13.1 8.9 2.5 5.5 7.5
Consumer Prices 6.3 8.6 6.5 8.9 5.9 5.4
Government Budget (% of GDP) -5.5 -3.7 -1.4 -2.1 -1.7 -0.9
Trade Balance ($bn) -24.9 -56.4 -89.1 -73.6 -78.3 -85.5
Current Account ($bn) -13.4 -46.6 -77.1 -58.8 -60.2 -63.5
Current Balance (% of GDP) -2.2 -6.4 -9.9 -7.4 -7.1 -7.2
Short-Term Interest Rates (%) 8.8 7.0 8.4 7.9 7.2 8.9
Exchange Rate (Per US$) 1.55 1.50 1.67 1.79 1.85 1.97
Source: Oxford Economics
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