We grew, but how?

THE third-quarter growth results exceeded expectations. It’s all very well and good but how did we reach this rate? The 8% growth in industry is understandable but is there anyone who can explain the 0.8% growth in the services sector? What about the 9.2% rise in consumption expenditures? How arewe going to interpret this growth in consumption under such conditions?

The Turkish economy grew by 6.7% in the third quarter compared to the same period of the previous year. This is a fantastic rate, well above expectations, which mostly revolved around 5%. I previously wrote that a growth rate above 5% is not generally expected. Just like everyone else, I was mistaken, too.

With the 6.7% growth in the third quarter, the total growth of the economy reached 0.5% in the first nine months of the year. The annual growth of the economy became 2% as of the third quarter. What’s important are the details between the lines. The third-quarter growth rate is nice but it’s important to look at the details in terms of how we achieved it.

Let’s get one thing clear: Growth essentially means production. More and more production. You either consume what you produce or export it. But the origin and the starting point is production. The rates show
us that Turkey produced well in the third quarter. This argument was already proven with industrial production.

Industrial production increased but did this increase boost consumption of the produced goods? Of course, there’s no such thing as the “consumption of industrial goods”, we need to look for this consumption in other indicators. These indicators are the final consumption expenditures of
households. The final consumption expenditures of residents and non-residents increased by 61.2% in durable consumer products, reaching a new record-high. Vehicles, especially automobiles, were the main reason behind this rate. The increases in semi-durable consumer goods and non-durables were 8% and 6%, respectively. The consumption expenditures in the services sector decreased by 16%.

Durable goods, semi-durable goods, non-durables and services…The increase in these four consumption groups was only 0.6%. It’s obvious that the burden of the services sector is very heavy; that’s why the total increase neared zero. It’s not possible to distinguish residents and non-residents completely but we can see the change in residents’ consumption, as TurkStat provides this rate. Residents’ consumption expenditures increased by 9.2% above last year’s level.

Let’s stop right here, take a deep breath and think about this for a second. People increased their consumption expenditures by 9.2% in the third quarter. If you includeconsumption, people bought 109 automobiles this year versus 100 automobiles last year, ate 109 kilograms of tomatoes this year versus 100 kilograms last year and consumed 11 kilograms of meat versus 10 kilograms last year. They managed this under these conditions, at such a a time when businesses were closed and people became unemployed, at such a period when those who are employed also limited their consumption to save a few bucks with the worry of losing their jobs. The source of this rise in expenditures? Loans. What will happen when the repayment of those loans begins?

Growth in services a surprise

Among all sectors, tourism experienced the most issues in the third quarter. This was normal, as the whole world experienced similar issues. Officials repeatedly said foreign tourism was well below last year’s level. Last year’s figures were also low in domestic tourism.

Tourism is included in the services sector item in GDP, which is calculated through the production method. In addition, accommodation, trade and transportation are also included in the same item. In the best possible scenario, tourism decreased by
half this year while trade is no better than last year, similarly transportation. But the services sector,
which is composed of these branches, grew by 0.8%. This rate is, of course, calculated with fixed prices.
I couldn’t understand this 0.8% growth hence was not able to interpret it. If there’s an argument such as
“we made (wrote) it, so it happened,” then I wouldn’t know. I would be happy if there’s an explanation and
they announce it.

Let’s not forget that there was a 24.6% contraction in the services sector in the second quarter. It’s not clear how a sector that declined by nearly 25% in a single quarter could to grow in the next quarter when the conditions for the contraction didn’t change. Services has the biggest impact on GDP growth – nearly 22-23%. That’s why a change in this sector has a major effect on the total GDP.

Leave a Reply

Your email address will not be published.