Turkey: Strong increase in fiscal revenues and spending in February

Turkey: Strong increase in fiscal revenues and spending in February

Central government primary balance was TRY 3.5bn in February, significantly lower compared to the surplus of TRY 6.0bn in February 2012. The deterioration in the fiscal balance came despite stronger budget revenues, which increased 18% y/y. On the other hand, non-interest expenditures rose much faster by 34% y/y. The additional spending in February stems from payments to contractors and transfers to social security institution.

Turkey: The end of rebalancing

Turkey: The end of rebalancing

At USD 5.6bn, January's current account deficit was slightly higher than the market consensus and our forecast (both at USD 5.3bn). Consequently, 12-month cumulative c/a deficit declined USD 0.1bn to USD 46.8bn. Non-energy current account balance remained unchanged at USD 5.5bn on a 12-month cumulative basis. The revision of Turkstat's tourism revenue estimations was reflected to BoP statistics, and as a result, 2012 c/a deficit was revised down to USD 46.9bn from USD 48.9bn, or 5.9% of GDP. Net errors and omissions were revised from USD 4bn to USD 2bn for 2012.

Turkey: Inflation outlook left unchanged

Turkey: Inflation outlook left unchanged

The CBRT left its end-2013 inflation forecast unchanged at 5.3%, with a 70%-probability forecast range of 3.9-6.7%. CPI inflation is forecast to slip to 4.9% by end 2014 (with a 70%-probability forecast range of 3.1-6.7%). The official inflation target was kept at 5% for both years. The CBRT sees annual inflation rising in January on the back of tobacco tax hikes and resuming a downward trend thereafter. Core inflation is forecast to maintain its downward trend and fall below 5% by year end.

Turkey: Unemployment rate declined despite the record high participation rate

Turkey: Unemployment rate declined despite the record high participation rate

In October, unemployment rate remained unchanged at 9.1% while non-farm unemployment rate decreased 0.2pp to 11.4%. On a seasonally adjusted basis, unemployment rate decreased to 9.3% from 9.4% in September and non-farm unemployment rate declined 0.3pp to 11.7%. The unemployment rate declined in spite of the new record high participation rate which increased to 50.7% from 50.3% in September.

Turkey: GDP Surprises on the Downside

Turkey: GDP Surprises on the Downside

At 1.6% y/y, Q3 GDP growth was weaker than the expectations (2.6% y/y) and our forecast (3.2% y/y). On a seasonally adjusted basis GDP grew by 0.2% q/q in Q3, broadly in line with our expectation. The downward surprise in the headline growth number was mostly on the back of weaker-than-expected private investment and exports. The contribution of private sector investment was -2.2pp to growth. The expansion in exports slowed down to 11.9% y/y in Q3 from 20.9% y/y in Q2, still the contribution of foreign demand was 3.4pp. Consumption of households subtracted 0.4pp from growth whereas public sector spending contributed 0.8pp to growth. At the same time, Q1 GDP growth was revised to 3.4% from 3.3%, and Q2 GDP growth to 3% from 2.9%.

Turkey: Food-Driven Disinflation

Turkey: Food-Driven Disinflation

At 0.38% m/m, November's CPI inflation was significantly lower than market consensus and our expectation (0.9%), mostly due to a 0.12% m/m decline in food prices. Contrary to the global food price increases during the first half of the year, domestic food prices followed a subdued trend this year, resulting in a food inflation of 2.3% from January to November. The average January-November food inflation during 2007-2011 was 10%. Accordingly, annual CPI inflation declined to 6.4% in November from 7.8% in October.