Turkey’s economy is expected to shrink in the second quarter, its third straight quarterly contraction as it grapples with the effects of recession, and a Reuters poll on Thursday also pointed to zero growth in 2019 as demand and investment slows.
The poll of 18 economists showed the economy shrinking two percent year-over-year in the second quarter, based on the median, and estimated annual growth of zero percent for 2019, as last year’s currency crisis continues to weigh on the major emerging market.
Forecasts for the second quarter ranged from a one to 2.2 percent contraction. Estimates for annual GDP ranged from one percent growth to a two percent contraction, which on the whole was more optimistic than a July poll predicting the economy would contract this year.
“We expect the weak trend in investments to continue again and therefore have a bigger negative impact on GDP than in the previous quarter,” said Ozlem Bayraktar Goksen, chief economist at Tacirler Yatirim.
Turkey, the largest economy in the Middle East, has a track record of more than five percent growth. But a diplomatic dispute with the US last year and the currency crisis that wiped out more than 30 percent of the currency’s value triggered a contraction of three percent in the fourth quarter.
In the first quarter of 2019, the economy contracted 2.6 percent year-on-year even as it returned to growth on a quarter-on-quarter basis. It may again narrowly log quarter-over-quarter growth in Q2, economists say.
Second quarter GDP growth is due to be announced on September 2.
A sharper than expected fall in industrial production in June, shrinking retail sales in recent months, and limited public consumption contributed to weakness in the second quarter.
On the other hand, net exports, helped by weakness in the Turkish lira, “will continue to be the biggest positive contributor to GDP,” Goksen said, predicting a 1.5 percent year-on-year GDP rise in the second half of the year despite risks stemming from weak credit growth.
“At this point, we hold our 2019 forecast as a 0.3 percent annual contraction. We think there are downward risks,” she said.
A Reuters poll of more than 40 economists in July showed the contraction in Turkey’s economy was expected to continue until the third quarter of the year, with positive growth seen in the final quarter of 2019.
At that time, economists had forecast a 1.5 percent contraction annually for 2019. The government’s own sharply-lowered forecast for the year envisages growth at 2.3 percent in 2019, and 3.5 percent in 2020.
Turkey’s economy last contracted on an annual basis in 2009, by 4.7 percent.
Turkish economy to contract in Q2, log zero growth this year