Turkey: Upside risk to the 5% growth forecast – BBVA

Recent data showed the Turkish economy grew at 7.0% in yearly terms during the first quarter of 2021 and 1.7% from the previous quarter. Analysts at BBVA Research point out the current strong momentum, ongoing credit growth, and positive global outlook put upside risks to their prudent 2021 growth forecast of 5%.

Key Quotes: 

“Domestic demand gave a robust contribution of 6.0pp, while the contribution of net exports turned into positive (1.1pp) for the first time after 5 quarters. All of the sectors gave positive contributions in yoy terms where the highest support was from the industry with 2.5pp, which was followed by trade, transportation, accommodation sectors’ contribution of 1.4pp.”

“The slow-down is still not clear so far due to the reopening again and continuing credit growth rates at moderate levels. Private consumption still accelerates whereas investment stabilizes as of May.”

“Current strong momentum, moderating but continuing credit growth and more positive global growth outlook reinforce upside risks on our prudent 2021 GDP growth forecast of 5%. On the negative side, tighter financial conditions, downside risks on tourism revenues and finalization of the ban on lay-offs and short-term working allowances in June all raise the uncertainty. All in all, a positive surprise is now more likely given the pending reaction of the economy with the reopening in late May.”