Q2 growth may reach 25%

The Turkish economy will perform a little better in the second quarter of the year. The gross domestic product (GDP), which contracted by 10.3% to USD 385bn in the same period of last year from USD 429bn in 2019, seems like it will increase by around 25% to USD 480bn in the second quarter of 2021.

Some government officials already signaled around 20% growth in the second quarter a while ago.

The May industrial production data announced by the Turkish Statistical Institute (TurkStat) last week showed that the second-quarter growth may be between 20%-25% and it may even be closer to 25%.

After increasing by 65.5% in April annually, industrial production rose by 39.5% in May. The average of the two months stood at 52%.

In June, industrial production returned to normal and rose right up from its pandemic-related dip in April and May. So, we shouldn’t expect a record-high annual production number in June.

However, even if production stays unchanged in June, industrial production will be above 30.5% of the second quarter of 2020 with increases in April and May. If industrial production rises by 5%, second-quarter growth will be around 32.6%.

A 30%-35% growth in industrial production in the second quarter means 20%-25% GDP growth during the same period. The growth expectations, both in industrial production and GDP, 35% and 25% respectively, are indeed very high and likely.

The share of industrial production in GDP is around 20%. So, although other sectors won’t grow, a 30%-35% growth in industrial production would add 6-7 points to GDP.

Moreover, we’ve already observed above expectation growth in other sectors in the first quarter. A distinct rise in the services sector in the second quarter won’t be surprising. Tourism will surely contribute to this recovery.

If the Turkish economy grows by 25% in the second quarter, the annual growth rate will exceed 10%. If the Turkish economy grows by 25% in the second quarter on top of 7% in the first quarter and thus, if the growth in the first half approaches 16%, the annual growth will be 6.9% even if the economy stays flat in the second quarter.

Undoubtedly, second-quarter growth coming below 25% and contracting rather than growing in the H2 are the factors that will reduce this rate.

But if the opposite happens and a growth of 5%, for example, can be achieved in the second half of the year, which is largely dependent on the pandemic, then annual growth will approach 10%, 9.7% to be exact.

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