Turkey's economy noted a 9.9% contraction in 2Q20 period compared to the previous year, when the adverse effects of Covid-19 outbreak were felt. The median expectations of economists pointed to the expectation of a contraction between 10.5% and 13.5% in market surveys. During the pandemic period, the economy shrank by 11% on a seasonally adjusted basis compared to the previous quarter. Thus, the fastest contraction before that was experienced by 11.4% in 1Q09 period, which coincided with the global financial crisis.
Looking at the details of GDP; On sectoral basis, the industry seems to have shrunk by 16.5%, the construction sector by 2.7% and services by 25%. With the impact of the Covid-19 epidemic, the low-capacity work explains the shrinkage in production due to the closing and locking measures or the protection from the epidemic and demand conditions. The services sector was also deeply affected by the quarantine bans and restrictions during this period.
The government's final consumption expenditures decreased by 0.8% in 2Q20 compared to the same quarter of the previous year as a chained volume index. Consumption expenditures of resident households contracted by 8.6% and gross fixed capital formation was 6.1%. In this period, along with supporting loan growth with low interest rates, growth was tried to be balanced and the demand on the private consumption side was aimed to be stimulated. At the same time, in order to ensure the continuity of company activities and protect employment, a number of economic measures were implemented, company and employment-oriented incentives were given, and financing conditions were kept as loose as possible.
In the 2Q20 period, imports of goods and services decreased by 6.3% on an annual basis, while exports decreased by 35.3%. In addition to factors such as the contraction effect of the epidemic on foreign trade, transportation difficulties and cost effects, the demand shock is also effective in this contraction. In particular, during this period, the contraction in foreign demand was the main factor that exerted pressure on exports, as the epidemic was at its peak in Europe and the effect of total closures was deeply felt. It is observed that the contraction in consumption, exports and investments had the greatest impact on the general economic contraction in terms of sub-items. With the transition to the economic normalization phase in June, although the recovery started, 2Q20 recorded a contraction that was almost double digits due to the effect in April and May.
We see the positive impact of increased returns to work and accelerated business activities within the scope of the economic normalization process in the 3Q20 period. The reflection in leading indicators confirms that the economy is in the phase of recovery from the bottom point. On the other hand, with the increasing volatility of the TRY, it is expected that the Central Bank will adopt a tightening policy, in addition to slowing down the credit growth and demand will be also expected to decrease due to the increased taxes on the import side, especially in the automotive sector. In this regard, the recovery in demand by the end of the 3Q20 period will lose momentum and will be limited. During the rest of the year, pandemic conditions and the sustainability of the economic recovery will be the main determinants. We expect the measures taken by the government to support the economic recovery to be continued as needed.
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Hibya Haber Ajansı