GDP in Turkey grows by 11.1% – why this official number deforms the view

The Inflation numbers ​​of the last few months in Turkey each time clearly exceed expectations. Statisticians recently announced an annual increase of 12.98% for the month of November. Today, statisticians report a gross domestic product (GDP) for Turkey, which grew by a whopping 11.1% in the third quarter of 2017 compared to the previous year. Now you could say: If GDP roughly grows just as fast as Inflation, then everything is alright?

Because then the price increases can be compensated by the stronger economic performance, because there are more jobs and higher wages. No, we do not want to bash Erdogan here. It´s just about the dry statistical numbers. Why now +11.1%? In the three previous quarters, the increase was only 4.2%, 5.3% and 5.4%. Why this jump up? Look at the graphic. Exactly one year ago, there was the coup attempt in Turkey in the third quarter. This was followed by a brief slump in economic output, based on the uncertainty that prevailed for a short time.

The slump in Q3 2016 was 0.8%. Therefore, the baseline from 2016, which is compared with the current data from this year, is very low. Therefore, such a high percentage increase of 11.1% can be made! Growth is expected to decline again next quarter, to perhaps 5%? But yes, 5% is significantly more than in Europe. Nevertheless, at the same time there is an inflation that is more than twice that number – that’s hardly acceptable.

There is also a calendar effect added to the 11.1% increase. If the number of days equals between Q3 2016 and Q3 2017, the increase is only 9.6%. After all, year-on-year wages are even higher in Turkey than inflation, at +14.4% (Q3 to Q3). Exports increase by 17.2%, household consumption by 11.7%.


Chart and data: Turkstat

We have long accompanied the Turkish lira in its down trend. For a long time it was a nice and clear trend up for Euro vs Lira, diligently fueled by Erdogan’s statements and actions. At the end of November, the Euro reached its peak against the Lira at 4.72. Since then, the price came back to 4.51. It’s either a correction or a pause in the uptrend. It´s visible in this long-term chart – yet it is not a true trend reversal.


Euro vs Lira since end of 2014.

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