Third quarter growth explained: Opinion


Turkey’s growth rate in the third quarter was 7.38%, according to the calculations made by the Turkish Statistical Institute (TurkStat). This result also includes the base effect due to the economic contraction and recession in the past two years. However, it is still above Turkey’s potential growth rate.

This growth rate is contradicted by the fact that economic actors and citizens complain about economic deterioration, and are left unsatisfied by their situations.

This requires a closer look at the growth data, taking this contradiction into account. Highlights of the third quarter, considering a range of factors, are as follows:

>> Although annual total gross domestic product (GDP) increased by USD 795bn, it is still below the 2018 year-end level. The low level of GDP in dollar terms increases Turkey’s vulnerability in terms of international competition, as well as external debt and current account deficit indicators.

>> GDP per capita is USD 9,450 as of the third quarter, according to our calculation. This is also below the 2018 year-end level. In addition, it is necessary to add the immigrant population, especially the Syrians, to the per capita income calculation. Even if we accept that the immigrant population is limited to 5 million, per capita income falls to USD 8,920. This is equal to the 2009 level, during the economic crisis 12 years ago.

>> The most critical point on the sectoral basis is that agriculture has shrunk by 5.94%. Downsizing in agriculture is a key problem both economically and socially. It is also a critical factor in terms of inflation and impoverishment.

>> A 6.72% contraction in construction and a 20% shrinkage in the finance sector in the past two quarters should also be noted as critical points.

>> The base effect plays a large role in the performance of the services sector (such as trade, transportation, storage, accommodation and food), which makes the highest contribution to growth (over 4.5 points).

>> The increase in exports due to the acceleration in international trade that came with the relaxation of pandemic measures has made a significant contribution to the 10% growth in industry.

>> With exports growing by 25.60% and imports shrinking by 8.26%, foreign trade was the channel that made the highest contribution to third quarter growth. The post-pandemic cyclical recovery in international trade and the base effect, as well as the devaluation of the lira, also contributed to the export performance.

>> The fact that investments shrank by 2.44% despite such growth is a remarkable contradiction. The 17.53% growth in machinery and equipment investments is an important point. However, it should be noted that armament expenditures are also included in this category and we do not know the extent of their effect on the result.

>> The most critical point of the GDP data is the serious decrease in the share of labor, which is 26.84%. This means a loss of 2.85 points compared to the third quarter of 2019, before the pandemic.

>> This is the reason why large sections of society do not feel this growth, despite high numbers on paper. On the contrary, they say that they are getting poorer.

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