Turkey: Economic Review for September 2011
Almost all emerging market economies were effected by the recent deterioration in global economic outlook which in return caused to postpone implementation of further tightening measures – at least for the short term.
Domestic markets got their share from undesired developments in global markets. In Turkey for instance, the ISE-100 index suffered a sharp fall and Turkish Lira could not avoid losses against US $.
As far as production is concerned, seasonal adjusted industrial production index has declined for five consecutive months and there was a significant fall in capacity utilization.
Investment and consumption expenditures in the coming period are expected to be fairly weak judging on the real sector and consumer confidence indices
Manufacturing Purchasing Managers Index (PMI) on the other hand, declined below 50 threshold in August for the first time since April 2009, which certainly points to a contraction in production.
One of the real concerns of the administration should be the fact that with the deceleration in imports parallel to the slowdown in domestic demand and the increasing exports supported by TL’s depreciation, the current account deficit, which is the main fragility of Turkish economy, is expected to narrow in the coming months.
Editor
BUSINESS TURKEY TODAY
INDUSTRIAL PRODUCTION
Industrial production has continued to lose momentum in June. Compared to the same month of previous year, the increase in industrial production realized as 6.7%, lower than expected.
On the other hand, analyzing on a quarterly basis, it was seen that the seasonal and calendar adjusted industrial production decreased by 1.68% in the second quarter of 2011 compared to the previous quarter (Source: Turkstat).
Still below the pre-crisis levels, capacity utilization ratio (CUR) realized as 76.1% in August. Seasonally adjusted CUR, on the other hand, reveals the recent slowdown in economic activity. Developments in global markets are expected to be influential on CUR in forthcoming period
UNEMPLOYMENT
According to Household Labor Force Survey unemployment rate decreased by 2.1 points to 9.4% in May compared to the same month of previous year.
In this period, while labor force participation rate was realized as 50.5%, seasonally adjusted unemployment rate rose for a second consecutive month. It was seen that seasonally adjusted employment increase also lost some momentum.
The employment figures confirmed the loss of momentum in the economic activity observed in the second quarter of the year (Source: Turkstat).
FOREIGN TRADE
In July, exports rose by 24.2% to $11.9 billion and imports by 29.9% to $20.9 billion, compared to the same month of the previous year.
Consequently foreign trade deficit realized as $9 billion in July, while import coverage ratio declined by 2.7 points to 56.8%, compared to the same month of previous year.
As of the JanuaryJuly 2011 period, it was observed that the rise in foreign trade deficit eased somewhat due to the deceleration in imports in recent months. During this period, the rise in exports was 20.5% and 41.3% in imports, compared to the same period of previous year.
CURRENT ACCOUNT DEFICIT
Current account balance posted a deficit of $7.6 billion in June.
Current account deficit has been rising rapidly since the beginning of this year due to the widening in the foreign trade deficit and reached $45 billion in January-June 2011.
Moreover, as of June, 12-month period cumulative current account deficit realized as $72.5 billion.
As a result of the measures towards slowing down domestic demand as well as the weak demand in the foreign markets, both imports and exports started to ease in the second quarter.
However, foreign trade deficit still maintained its high levels and 12-months cumulative data continued to increase.
SOURCE: ISBANK Economic Analysis
