Turkey Economic Outlook
May 7, 2019
The Turkish economy continued to flag at the start of the year. Consumer credit growth eased to a decade low in Q1 2019, while retail sales continued to contract in the first two months of the year. Consumer spending felt the pinch from high unemployment, depressed confidence levels, still-elevated inflation and a weak currency. Moreover, the manufacturing sector remained in a tough spot as reflected by its weak PMI reading throughout Q1 and April. Against this backdrop, the government announced new reforms in early April in an attempt to stimulate the economy. In more positive news, tourism income rose robustly in the first quarter of the year as the number of visitors increased noticeably from a year earlier, likely aided by the starkly cheaper lira. Meanwhile, the trade deficit narrowed as imports continued to fall sharply through March in tandem with the plunging lira.
Turkey Economic Growth
The economy is expected to shrink this year on the back of falling domestic demand due to high inflation, rising unemployment and a weak currency. Towards the end of the year, the economy should recover and inflationary pressures should ease, which would provide room for monetary policy easing. Lingering geopolitical tensions and currency volatility cloud the outlook, however. FocusEconomics Consensus Forecast panelists expect the economy to shrink 1.0% in 2019, which is down 0.2 percentage points from last month’s forecast, and to expand 2.9% in 2020.