How did Turkey’s growth exceed expectations?

Turkey’s eagerly anticipated growth numbers for the first quarter of 2021 were announced at the beginning of the week. It exceeded all expectations, growing 7 percent on a year-to-year basis. When taking into consideration the conditions the global coronavirus pandemic, such a number points to extremely significant data. If we look at the rapid growth composition, there is glad tidings to be received here as well.

When we take a look at expenditure items for the first quarter of this year, we are able to see the biggest contribution to growth was made by household consumption with 4.5 points. At first glance this may seem a tad perturbing, but we must not forget that this data stems from an environment where a global pandemic rages on. The salient point I want to draw attention to is investments and the net contribution made by foreign trade. According to the latest numbers, the contribution of investments to the economy is 2.9 points, while net export contributed with 1.1 points. This situation, as Turkish Treasury and Finance Minister Lütfi Elvan pointed out, means that 56 percent of the country’s growth emanates from net foreign demands and investments. I think that such a composition is also important for healthy growth discussions that have been on the agenda for a while.

It goes without saying that the necessary the partial and total lockdown decisions that were taken within the context of curbing the pandemic had definitely had an impact on this issue.

According to TurkStat data, when we analyze the activities making up the first quarter of Turkey’s gross domestic product, we see that the we see that the highest increase has been in information and communication activities with 18.1 percent. It is followed by “other services” and activities with 14.4 percent and industrial activities grew by 11.7 percent. Agriculture, forestry and fishing activities also increased by 7.5 percent, which also means growth for the 10th consecutive quarter. Growth for the “services” sector unfortunately was 5.9 percent, however when we consider the breakdown of the sector, we can see that it has incurred serious losses.

Taking a look at preliminary data, the speed of growth in the second quarter of 2020 and the base effect that will occur, it’s possible to discern that growth in the second quarter of 2021 will be a double-digit number. This is very important data. On the other hand, it should not be forgotten that some risks still run high. For example, cost pressure created by the increase in global food and commodity prices will be effective for a little while longer. This is closely related to industrial activities of the growth graph.

Furthermore, the speed of the U.S. economy recovery being faster than expected, and the pressure on local currencies due to the FED tightening its monetary policy should be closely monitored.

With risk also comes opportunity. For example, we can see how the changes in global supply chains affect positively affected Turkey, from the trajectory of export figures even during the pandemic. In conclusion, we are in such an era where we can utilize opportunities by managing the risks.